Study shows social media users are investing more in crypto

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What if social networks had an impact on investment behavior, especially regarding cryptocurrencies? This is what a new study from the University of Georgia points out, published in November in theInternational Journal of Bank Marketing. While the link may not seem obvious at first glance, researchers Kyoung Tae Kim and Lu Fan have looked into the issue. The results appear, ultimately, quite logical.

The viral mechanics of cryptocurrency adoption

The survey revealed that half of people using social mediahave taken the plunge into investing in cryptocurrencies, a figure that contrasts sharply with the 10% observed among non-users. In other words, social media users are five times more likely to invest in cryptocurrencies than those who do not use them. So where does this huge disparity come from??

It stems from the very specificities of digital platforms. YouTube and Reddit are emerging as the main catalysts for this trend, their discussion-friendly formats allowing for a detailed exploration of the issues surrounding the world of crypto. Reddit, in particular, is full of subreddits (thematic discussion groups) dedicated to cryptos and YouTube is full of advice/tutorial videos from crypto enthusiasts showing off their knowledge on the subject.

The virality of the phenomenon can be explained in particular by a particularly powerful social ripple effect. As Lu Fan points out: ” People see their friends, family, and celebrities they admire investing in these assets, which prompts them to follow suit “. This dynamic of social imitation, amplified by the platforms' algorithms, thus creates a self-reinforcing circle of growing adoption. Cryptocurrencies are often perceived as a complex, even esoteric, subject. The opinion of a loved one, a celebrity or an influencer can then serve as a reassuring point of reference and facilitate decision-making.

The sociological paradox of digital investment

The demographic analysis of investors is also quite interesting to highlight in the sense where it turns out to be quite paradoxical. The typical profile that emerges from the study is that of a young man, characterized by a marked propensity to embrace financial risk. This disposition is often accompanied by an increased trust in new technologies and an active presence on information exchange platforms.

The researchers' strangest discovery is thean inverse relationship between the level of education and engagement in cryptocurrencies. This negative correlation suggests that traditional financial education mechanisms are no longer playing their usual role as a safeguard.

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On the contrary, people with a more modest academic background show a greater attraction to these new assets, a phenomenon that researchers attribute to a combination of factors: a lower aversion to unconventional risks, a greater receptivity to the promises of financial democratization, and paradoxically, a less analytical approach to the mechanisms underlying cryptocurrencies.

A new sociological configuration that shakes up the classic models of investment, where higher education traditionally constituted a vector of engagement in the financial markets. A new financial culture is developing, shaped more by the flow of information from social networks than by conventional academic curricula.

The time evolution is equally revealing: between 2018 and 2021, the percentage of investors almost doubled, from 15% to 28%. Even more striking, the proportion of people considering an investment increased from less than 20% to more than a third of the population studied.

The systemic challenges of digitalized finance

Several areas of vulnerability were identified in this study. First, the predominance of young investors in the cryptocurrency universe: it is also synonymous with an asymmetry between the technical accessibility of exchange platforms and the financial maturity required to navigate these markets, which are extremely volatile by nature (the recent example of the BTC explosion is very telling). The immediacy of social networks accelerates decision cycles, often reducing the time spent on risk analysis.

Second phenomenon that has caught the attention of researchers: the proliferation of toxic information contenton social media. No subject escapes disinformation, and cryptos are no exception. In this environment, the boundaries between legitimate expertise and deliberate manipulation are becoming dangerously blurred. Scams are now adorned with the attributes of digital credibility – numerous followers, professional content, apparently authentic testimonials – making them particularly difficult to detect for novice investors.

The history of modern finance will certainly be forever marked by this democratization of crypto investments linked to the use of social media. If we further consider that the future of these virtual assets will probably be written, at least in part, on the latter, we will have to press two levers. First, develop a solid financial culture and then, promote the dissemination of qualitative information to enable investors to make informed decisions.

• Social media users are adopting cryptocurrencies much faster thanks to the viral effect and recommendations from influencers and friends.
• Young men, often less financially educated, are the main investors, attracted by the risk and the promises of financial democratization.
• Easy access, however, masks dangers: misinformation and lack of preparation for market volatility.

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