What if social networks had an impact on investment behaviorespecially regarding cryptocurrencies? This is what the finger is pointing at a new study from the University of Georgiapublished in November in theInternational Journal of Bank Marketing. Even if the link does not seem obvious at first glance, researchers Kyoung Tae Kim and Lu Fan looked into the question. The results ultimately appear quite logical.
The viral mechanics of cryptocurrency adoption
The investigation revealed that half of people use social media have taken the plunge into investing in cryptocurrencies, a figure which 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 don’t use them. Where can this strong disparity come from?
It finds its origins in the very specificities of digital platforms. YouTube and Reddit are emerging as the main catalysts for this trend, their discussion-friendly formats allowing a detailed exploration of the issues related to 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 is explained in particular by a particularly powerful social ripple effect. As Lu Fan points out: “ People watch as their friends, family, and celebrities they admire invest in these assets, inspiring them to follow suit “. This dynamic of social imitation, amplified by platform algorithms, thus creates a self-perpetuating 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 benchmark 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 frequently accompanied by increased confidence in new technologies and an active presence on information exchange platforms.
The researchers’ strangest discovery lies in thethe inverse relationship between level of education and engagement in cryptocurrencies. This negative correlation suggests that the traditional mechanisms of financial education no longer play their usual role of safeguard.
On the contrary, people with a more modest academic background show a more pronounced attraction for these new assetsa phenomenon that researchers attribute to a combination of factors: less aversion to unconventional risks, increased receptivity to promises of financial democratization, and paradoxically, a less analytical approach to the mechanisms underlying cryptocurrencies.
An unprecedented sociological configuration which shakes up the classic patterns of investment, where higher education traditionally constituted a vector of engagement in financial markets. A new financial culture is in full development, shaped more by the information flows of social networks than through conventional academic courses.
The temporal evolution is just as revealing: between 2018 and 2021, the percentage of investors almost doubled, going 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 study population.
The systemic challenges of digitalized finance
Several areas of vulnerabilities were identified in this study. First, the predominance of young investors in the world of cryptocurrencies: it is also synonymous with an asymmetry between the technical accessibility of exchange platforms and the financial maturity necessary to navigate these markets, which are extremely volatile by nature (the recent example of the explosion of BTC is very telling). The immediacy of social networks accelerates decision cycles, often reducing the time spent on risk analysis.
Second phenomenon which caught the attention of researchers: the proliferation of toxic information content on social networks. No subject escapes disinformation, cryptos are no exception to the rule. In this environment, the lines between legitimate expertise and deliberate manipulation become dangerously blurred. Scams now adorn themselves with the attributes of digital credibility – numerous followers, professional content, apparently authentic testimonials – making their detection particularly difficult for novice investors.
The history of modern finance will certainly be marked forever by this democratization of crypto investments linked to the use of social networks. If we further consider that the future of these virtual assets will probably be written; in part at least; on these, we will have to press two levers. First of all, 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 and family.
- Young men, often less financially educated, are the main investors, attracted by risk and the promises of financial democratization.
- Easy access, however, masks dangers: misinformation and lack of preparation for market volatility.
