- A third of new crypto investors in 2022 used a friend’s recommendation as their primary motivation for crypto investing.
- The most prominent social element driving such investments is fear of missing out (FOMO).
Nearly a third, or 31% to be precise, of new cryptocurrency investors in 2022 used a friend’s recommendation as their primary motivation for investing, according to a recent study.
The joint study was published by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the National Opinion Research Center (NORC) at the University of Chicago.
The study said the biggest motivator for new crypto buyers is a friend’s suggestion. In comparison, only 8% of new investors in traditional assets such as stocks and bonds rely on recommendations from friends.
The gap implies that there is a social element to crypto investing that is not present in equities or bonds. The most prominent of such social elements is a fear of missing out (FOMO).
Gary Mottola, a co-author of the report, however, said that it can be a “double-edged sword.”
Many crypto investors move to traditional investing
Crypto recommendations of friends or financial influencers active on social media may more often than not be unreliable. The Securities and Exchange Commission (SEC) of the U.S. recently penalized celebrities such as Lindsay Lohan and Soulja Boy for undisclosed endorsements of several cryptocurrencies.
Investors relying on friends’ recommendations may not fully comprehend the risks and volatility involved with crypto assets. They may not understand how it fits within a broader, well-diversified financial portfolio.
One of the pitfalls of taking a friend’s advice is that you may be getting a suggestion at the wrong time. It could be when the market is nearing its peak and its growth potential has been saturated.
However, in some scenarios, crypto can serve as an entry point for investors into more traditional investing.
According to the report, 36% of new crypto investors claimed that their crypto investments increased their interest in investing in the share market.
