A new study reveals that social media users are significantly more likely to invest in cryptocurrencies compared to non-users. The research emphasizes the role of social platforms in influencing investment behavior and underscores the importance of media literacy and regulation in the burgeoning crypto market.
Recent research led by the University of Georgia, published in International Journal of Bank Marketing, suggests that hearing about cryptocurrencies online may significantly influence people’s investment behaviors.
Cryptocurrencies, or “crypto,” are digital currencies used for both payment and investment purposes. Over the past decade, they have surged in popularity, particularly as more individuals learn about them through social media platforms.
According to the study, approximately half of social media users surveyed have invested in digital currencies. The research indicates that the more social media platforms a user is active on, the higher their likelihood to invest in crypto. Conversely, only 10% of non-social media users have made similar investments.
YouTube, Reddit, Twitter and Clubhouse users were identified as the most likely to invest in digital currencies, while Instagram users showed less enthusiasm.
The researchers theorize that this disparity may be due to the nature of the content on these platforms. Longer YouTube videos and Reddit threads allow for more in-depth discussions about crypto, compared to Instagram’s visually-focused content.
“A lot of people talk about cryptocurrency on social media and how popular it has become,” co-author Lu Fan, an associate professor at UGA’s College of Family and Consumer Sciences, said in a news release. “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 study found that men and individuals with a higher risk tolerance were more predisposed to invest in cryptocurrencies. Conversely, those with higher education levels were less likely to do so. Age was another influential factor, with older individuals being less likely to invest in crypto.
National data shows that interest in crypto is rapidly growing. In 2018, the National Financial Capability Study and Investor Survey found that only 15% of participants had invested in crypto. By 2021, this figure had nearly doubled to 28%.
The current study utilized data from the 2021 survey, which examines demographics, investor behavior and financial knowledge and capability.
Even those not invested in crypto are becoming more aware of it. Fewer than 20% of participants in 2018 had considered investing in crypto, compared to over a third in 2021.
Investing in digital currencies comes with inherent risks due to their volatility and unpredictability. Lu Fan emphasizes the importance of thoughtful consideration before investing.
“When people think about investing in crypto, they should not just simply follow the crowd,” Fan added. “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?’”
The study highlights the increased necessity for individuals to distinguish between fact and opinion on social media, which is often rife with misinformation and fraud. Younger investors, who are prominent social media users, can be particularly susceptible to online scams and poor financial advice.
“Our study showed that younger adults are more likely to invest in crypto now, and they’re also the majority users of social media,” added 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 call on policymakers to consider these findings when developing regulatory guidelines for cryptocurrencies. They also advocate for enhanced media literacy education to help individuals identify credible information.