Drive to ‘get rich quick’ plus FOMO drives crypto speculation
A new survey for UK regulator, the FCA found that the seductive desire to get rich quick is behind most investment in cryptocurrencies. The report said: “Most respondents expressed a desire to make significant amounts of money in their lives, and while some were looking for ways to supplement their income, others had explored a variety of ways to try to ‘get rich quick’ without having to work. This desire to become wealthy with minimal effort seemed to attract them to the world of cryptoassets.”
‘FOMO’ – fear of missing out – was another important driver. Many respondents had read articles or heard the stories of consumers who had bought Bitcoin in or before 2017 and made a significant amount of money. Already worried that they might have left it too late, they didn’t want to miss out on the chance to participate in rising asset prices.
The majority of respondents decided to buy cryptoassets after speaking to friends and acquaintances who claimed to have made a profit after purchasing them. Social media platforms were the most common source of news and information on cryptoassets.
Many are putting in their money, with no protection against losses and without fully understanding what they are doing, according to the report. When discussing their understanding of the market, many of the respondents flitted between talking about cryptoassets as tradeable products and the technology that underpinned them, blockchain.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “This research shows that investors went into cryptocurrencies for all the wrong reasons, ticking off every single warning sign for investing. Many people said they bought cryptocurrencies without understanding them, because they wanted to ‘get rich quick’, and had seen lots of excitement on social media about them.
“The subsequent collapse in the price of bitcoin and other cryptocurrencies should serve as a warning signal for those getting into investing that you need to do your research before you put your hard-earned cash into something. Many people in the study said they bought cryptocurrencies because friends told them to or because a taxi driver told them it was a safe bet, but failed to do any research themselves.
“It’s a timely reminder that before you invest you should make sure you understand what you’re getting into, that you know the risk of what you’re buying and that you’re not just relying on hype and excitement from friends or social media. Investing is not a get rich quick scheme, it’s a way to build wealth slowly and with patience – and anything that instils a “fear or missing out” or requires you to invest before thinking is best to be avoided.”