According to a recent CNBC Survey conducted by Spectrum Group, most millennial millionaires who have already had a massive chunk of their wealth in cryptocurrencies are thinking of investing more despite clashes in crypto prices. It is also to be noted that millionaires are more bullish about the economy, interest rates and tax rates.
Around 41% say that the economy will get stronger in 2022, while 35% say it will weaken. The survey highlights that 83% of millennial millionaires own cryptocurrencies. Around 53% of those millionaires have more than half of their wealth in cryptocurrencies, and around one-third of millionaires have 75% of their wealth in cryptocurrencies like Bitcoin and Ethereum.
Interestingly, on the other hand, cryptocurrency holdings are much less popular among older generations. According to the survey, only four percent of baby boomers hold cryptocurrencies, and 75% of Gen X do not have any crypto holdings. The divide between the attitudes of younger and older generations about cryptocurrencies is quite sharp.
Another Bankrate survey suggests that at least half of millennials are comfortable investing in cryptocurrency as compared to 37% of Generation X and 22% of baby boomers. Of those, 12% of millennials think that Bitcoin and other cryptocurrencies are the best places to invest money in the long term.
There are primarily two categories of millennial millionaires first, those who made their money mainly due to crypto growth, and second, those who used their existing wealth (mainly generational or from startups) to invest in cryptocurrencies. For around 45% of the millennials, inherited generational wealth was a factor in their total wealth. And for millionaires worth $5 million and over, generational wealth was a prominent factor (75%).
But other millionaires who invested in crypto years ago became self-made millionaires due to vast growth in their crypto investments and assets. Most of these millionaires seem very comfortable with the volatility of crypto. Millennial millionaires are bullish and more aggressively investing in risky assets than their older peers.
A vast generational gap
The results suggest a vast generational divide between younger and older generations in regard to their interest in cryptocurrencies. Even though older generations of millionaires are still quite hesitant to invest in cryptocurrencies, millennials are capitalizing on the opportunities provided by this unique vehicle of investment so much so that it has become one of the primary sources of their wealth creation.
Despite the recent volatility in the prices of cryptocurrencies, millennials have no plans to reduce their crypto holdings. The CNBC survey suggests that around half (48%) of millennial millionaires plan to increase their crypto holdings in the next 12 months, and around 39% plan to maintain their current holdings. On the other hand, only six percent of millennial millionaires plan to reduce their cryptocurrency holdings in the next 12 months.
Another point of contrast between the two generations was their perception of inflation. While inflation was the top concern for millionaires in the survey, millennials did not seem to be worried about it at all. This is mainly because the millennial generation has not experienced inflation, while baby boomers have. They cannot relate to those concerns because they have no memories of investing or living in a low-interest environment.
Millennials believe that Covid-19, higher taxes and the US stock markets are the most significant risks for them. On the other hand, older investors who have lived in the 70s and 80s believe inflation is the most significant risk. They think that the Fed is tightening cycles this year, and there will be a lower return from the market.
When the investment portfolio of a baby boomer and a millennial millionaire is compared, notable differences can be spotted. Baby boomers have already saved, invested and diversified their portfolios. They are not planning to change their investment strategy drastically instead, they plan to stick with their original plans.
On the other hand, millennials have started structuring their financial plans after they have left company stock or worked in a startup that is going public. Millennials, in general, seem more comfortable with taking risks, which was evident last year too, as they heavily invested in meme stocks.
Baby boomers who did not understand the meme stock phenomenon stuck with more traditional stocks like Apple and Microsoft and garnered steady returns. The risk appetite of millennials is mainly dependent on how they have earned their money. If the source of their wealth creation is cryptocurrency investment and growth, they are more likely to be bullish about it.
Should I invest in cryptocurrencies?
The interest in cryptocurrencies has been growing exponentially. People, especially the younger generations, stuck at home during the global pandemic are surfing online to explore non-conventional vehicles of investments. Even though quite speculative and volatile, cryptocurrencies have grabbed the attention of millennials.
Given the rising interest, the Commonwealth Bank recently announced its move to add a cryptocurrency trading function to its banking app. This was primarily motivated by the demand of its younger investors. It will allow customers to buy and sell 10 different cryptocurrencies on its banking app. This will help cryptocurrencies enter the mainstream market, eventually leading to greater adoption and acceptance of crypto assets.
Even though young Americans are relatively comfortable investing in cryptocurrencies, it is still important to remember that they are a volatile asset class. Experts suggest that newbies should only invest as much as they can afford to lose. To limit risk, you must not invest all your savings in crypto holdings instead, you should diversify your investment portfolio.
Also, it is not recommended to invest all your money in only one kind of crypto asset. Besides that, you should remember that cryptos are taxable assets, and you are obligated to pay taxes when you make any capital gains. Failure to do so can lead to heavy fines and penalties.
