When Eric Sullivan first bought cryptocurrency, he went all out. Sullivan, originally from Denver, Colorado, attended the University of Denver in the spring of 2020, when he invested all $20,000 of his accounting internship earnings in digital assets including Bitcoin, Ethereum and XRP coins. “I’ve saved a lot of money and I just dumped it all,” he explained. “I totally bought it, it feels good, it’s cool. I just love the idea of it.”
Sullivan, like other Gen Z crypto investors, watched with excitement as his investments grew day by day until they didn’t. The crypto market implosion began in May when the token TerraUSD collapsed, triggering a chain reaction of various crypto crashes and companies laying off workers or shutting down entirely. What was a $3 trillion industry in November 2021 is now a $1 billion industry.
Sullivan, 25, who works at a winery in Crested Butte, Colorado, made no profit and estimates he lost hundreds of thousands of dollars in valuation when the cryptocurrency market crashed. “I was like, okay, fuck, you know, I kind of screwed up, but whatever,” he said. “In general, it’s like water under the bridge.” Despite his initial disappointment, he remains a big believer in cryptocurrency.
Looking back on the crash, he explained that he didn’t feel like he had lost “real” money because he still had assets whose value had plummeted. He added that since he was young and had no financial responsibility to support his family, he did not see the money as a necessity. Going forward, he still plans to spend the majority of his investments in digital assets — an obvious decision for him. “I think it’s definitely the future,” he said. “I think the technology is there.”
Gen Z (including those born in the mid-1990s and early 2000s) drove the cryptocurrency boom in many ways, and when it collapsed, they fell the hardest. In addition to the appeal of making quick money, social factors are also driving young people to use cryptocurrencies.“The history of cryptocurrencies really stems from people’s distrust of central banks and financial institutions, who were basically bailed out for what they did in the 2008 recession,” explained financial advisor Douglas Boneparth. “Cryptocurrencies [represented] Freedom for a lot of people,” he said.
The volatility of digital assets also provides opportunities to make money outside of salary income. “The economic opportunities that our parents and grandparents had in terms of social and economic mobility do not exist for young people [today]. This means that if you want to be successful, you have to take risks. I think a lot of people look at cryptocurrencies from that perspective,” said Lee Reiner, policy director at the Duke Center for Financial Economics.
How much did young investors lose?
With the cryptocurrency market crashing last spring, seasoned experts weren’t shocked given the asset’s inherent volatility. Yet for many young investors, some of whom are still in school or working part-time, the extent of their losses is surprising.
“They were tricked by seasoned actors, people who knew better,” Reiner said. “Whenever one of these bubbles or scams pops up, it’s always the people who can’t afford the money the least who end up holding the bag, because the smart money comes out before it collapses,” Reiner said. In fact, Celsius and Several security-hyped platforms, such as Voyager Digital, declared bankruptcy this summer and froze customer deposits. Voyager is now facing lawsuits from clients who claim the platform misled investors, and Celsius is being sued by a former investment manager for engaging in fraudulent activities.
For many, the crash showed that the crypto market is not truly independent of the stock market and is vulnerable to the same setbacks that have kept many young Americans wary of Wall Street. Yet the vast majority of young investors I speak to are still invested in cryptocurrencies — literally and figuratively.
Don’t give up on cryptocurrencies
Josten Perez started buying cryptocurrencies in 2018 as a freshman at Hamilton College. His first exposure to digital assets was the meme-coin Dogecoin. He and some friends at Posse, a college admissions program, bought a few Dogecoins when the coin was still in its infancy. Although he sold his Dogecoin for a few hundred dollars before the coin really appreciated, the experience was exciting. “Task [of digital assets] It is to give people this concept of agency and to promote this decentralized environment. I’m Puerto Rican, and my parents and I grew up in poverty our entire lives. So, when you see things that can dramatically change different financial institutions and instruments, for me, that’s why I love cryptocurrencies,” Perez explained.
Throughout college, he invested in cryptocurrencies with funds from his school work. When it crashed, he said he lost about $15,000. Unlike Sullivan, however, he was able to save a lot of money by spending most of his funds on Ethereum before the crash.
Courtesy of Josten Perez
As with most crashes, not even the best-known investors are immune. Brian Jung, 23, has 1.5 million subscribers on his YouTube channel, which covers a range of personal finance topics including cryptocurrencies. He is also an investor and started buying cryptocurrencies in 2015. He explained that his digital asset valuation has dropped by six figures due to the crash. He also deposited $30,000 in Celsius before going bankrupt in mid-June. “When that happened, I felt like a viewer or any other investor. It was my hard-earned money, but I couldn’t get out. I knew for my viewers that it happened to them too ,” he explained.
Jung explained that about four weeks before the Celsius crash, he was contacted by founder Alex Masinski to ask for an interview on Jung’s channel. At the time, Jung declined because he doesn’t usually promote specific commercial projects on his channel, but not because he thought there was something wrong with Celsius. “When he reached out, I don’t think he reached out because he wanted to keep his name or try to do damage control before that,” Jung explained.
For Jung, who made millions from YouTube, however, the crash didn’t affect his access to liquidity or his day-to-day life. While he understands why many of his viewers were shocked by the crash, he advised them to keep their assets and wait for the market to improve. “While we did have that huge crash, I think the crash was still positive for the market in general. If we want to develop the potential of cryptocurrencies, we need all these scams and these pyramid schemes to go away. Unfortunately , at the end of the day, the people who are really hurting are the investors, the retail investors,” Jung said.
Jung said his cryptocurrency content on YouTube has seen fewer views in the past few months since the crash, which he explained as many retail investors lost interest after some losses. In Jung’s view, however, the audience that remained was “crazy bullish.” “If I were to even say semi-bearish or even neutral, they would step in and say, ‘No, Brian, like cryptocurrencies are here to stay.’ They are staunch believers,” Jung said.
What role does crypto play in responsible investment strategies?
The question that remains for many is: is investing in cryptocurrencies a good idea? In the absence of comprehensive regulation, young cryptocurrency investors are prime targets for rampant scams, misinformation and Ponzi schemes. Assets are inherently volatile, even as many hope for improved regulation.
Reiner doubts any cryptocurrency is a useful investment. “For cryptocurrency to have any long-term value, it needs to provide people with real economic utility. It needs to improve some product process services in the real economy that we haven’t seen yet,” Reiner explained.
While not all cryptocurrencies will survive, Boneparth believes that digital assets as a whole will survive. Boneparth said that for many people interested in exposure to digital assets, a 5% to 10% allocation across a diversified portfolio makes sense. According to Boneparth, Bitcoin appears to be the most durable option. Reiner said he would not advise anyone interested in cryptocurrencies to allocate more than 5% of their portfolio. “If you have the financial capacity and willingness to take risks, then of course, go ahead and allocate,” Lehner said.
Yet despite the chaos the asset has brought, many young investors are still as committed as ever. “There’s still a lot of money and talent and interest in this space. Those people are going to keep building, and maybe on the other side of it you’ll see something that’s really useful economically. I just don’t think it’s going to happen,” Lehner said. .
Perez has now not only invested his money in cryptocurrencies, but has made space part of his first steps in his career. Perez is now working as a Customer Service Manager in the crypto workspace of Imperial DAO SoHo. He remains invested in cryptocurrencies, and while he is critical of the hypercapitalist mindset he sees in the industry, he remains generally bullish. “You know, now that the money is gone, and I actually have a job, I’m going to buy more stuff,” he explained. “I still think the real cryptocurrency hasn’t been earned,” he said. “For me, again, it’s not about the money.”