Social media users more likely to invest in cryptocurrencies

YouTube, Reddit among platforms with highest crypto investment

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As social media grows, so too does awareness of cryptocurrencies. And hearing about them online may affect people’s behavior, according to a new study from the University of Georgia.

Cryptocurrencies, or “crypto,” are digital currencies used for both payment and investment. They’ve seen a surge in popularity over the past decade, especially as more people learn about them through social media.

The study found that about half of social media users surveyed have invested in digital currencies. And the more social media platforms a user was active on, the more likely they were to invest.

Meanwhile, only 10% of non-social media users had invested in crypto.

YouTube, Reddit, Twitter and Clubhouse users were the most likely to invest in digital currencies. Instagram users weren’t as keen on crypto.

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The researchers believe this may be because longer YouTube videos and Reddit threads allow for more of discussion about crypto. Meanwhile, platforms like Instagram are more focused on visuals.

“A lot of people talk about cryptocurrency on social media and how popular it has become,” said Lu Fan, an associate professor for UGA’s College of Family and Consumer Sciences. “There are a lot of celebrities talking about this. People are thinking, ‘Because my friends, families and the celebrities I admire all invest in that, maybe I should too.’”

The buzz around crypto drives investment patterns

 The researchers found men and those with a higher risk tolerance were more likely to invest in crypto. On the other hand, people with a higher education level were less likely.

Age was also a factor. Older people were less likely to invest in crypto.

Interest in cryptocurrencies growing rapidly

Interest in crypto has only been growing with time.

In 2018, the National Financial Capability Study and Investor Survey found that only 15% of participants had invested in crypto. Just three years later, that number had almost doubled to 28%. The national study and survey measures demographics, investor behavior, and financial knowledge and capability.

The present publication relied on data from the 2021 version.

Cryptocurrencies are also more prevalent in people’s minds, even if they don’t invest themselves. Less than 20% of participants said they’d thought about investing in 2018 compared to more than one in three in 2021.

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When people think about investing in crypto … they should also ask themselves, ‘Is it a good investment for me?’” —Lu Fan, College of Family & Consumer Sciences

Investing in digital currencies comes with risks, though. Crypto can be volatile and unpredictable.

“When people think about investing in crypto, they should not just simply follow the crowd,” said Fan. “They should also ask themselves, ‘Is it a good investment for me?’

“It may be suitable for some investors who have high risk tolerance, but it’s important to ask yourself, ‘Does cryptocurrency work for me? Can it help me achieve my financial goals?’”

Findings highlight an increased need for telling fact from opinion

Social media shouldn’t be the go-to source for people looking to invest in crypto, as it’s often a hotbed of misinformation and fraud, the researchers said.

Many social media users overestimate their investment knowledge. And younger investors can be particularly vulnerable to online scammers and bad advice.

“Our study showed that the younger adults are more likely to invest in crypto now, and they’re also the majority users of social media,” said Fan. “So, when serving those young adults who usually need to gain more financial literacy through life experience and age, there needs to be some guidance as well.”

The researchers encouraged policymakers to take this into account when developing guidelines and regulations for cryptocurrencies. They also urged an increase in media literacy education to make it easier for people to spot authentic information.

The study was published in International Journal of Bank Marketing and was co-authored by Kyoung Tae Kim of the University of Alabama’s Department of Consumer Sciences.