The Coming Of (Old) Age of Cryptocurrency

"For the second time in the last 30 years, her majesty Queen Elizabeth II appeals to a certain number of people to save Great Britain's economy" reads a letter sent to Paul Ridden, a resident of Buckinghamshire. The letter asked people to transfer £450,000 to £2 billion to the "bitcoin address that was attached to the letter" to save UK's economy in case of a "no-deal Brexit." Attempts like these, coupled with hacking and other frauds had costed people and firms over £4 billion worldwide until 2019, according to Ciphertree, a Silicon Valley based intelligence firm.

According to a report compiled by the US government's staff of Global Legal Research Directorate, many countries have responded to the increasing cryptocurrency frauds with more regulations. The main idea is to protect the citizens from "illegal activities." Some countries have even gone on to "require banks and other financial institutions that facilitate such markets to conduct all the due diligence requirements" to prevent the "personal risk" of its citizens.

The spurt of regulations is in response to an increasing number of people investing in the currency of the millennium. However, once dubbed as "this [next] generation's pension plan" by the New York Times, cryptocurrencies like Bitcoin are rightfully turning their eye towards another age group. According to an ING Vyasa research, people older than 45 years were as much aware of the cryptocurrencies as those under 35 years. In the survey, more than 60% of Europeans over the age of 65 knew what cryptocurrency was. While the millennials try to pay their student debts and high rents, cryptocurrency has shifted to a market which has the time and the money to invest in it.

The average student debt in the UK for those who finished their undergraduate courses in 2018 was £36,000. To put that into perspective, that is 6 bitcoins in today's market or conversely £6,000 more than what the average salary of a 30 year old graduate was in the country. The debts and the low income in the age group has led to millennials putting investments at a bare minimum. According to a report by Scottish Widows in 2018, one in five people aged 22-29 were saving less than 12% of their earnings. Bitcoin, one of the most traded and valuable cryptocurrency lost 70% of its value in 2018. For a millennial investing £10,000, that would have meant losing £7,000 or a fifth of their annual salary.

With a highly volatile investment opportunity provided by cryptocurrencies, thrill seeking was one of the reasons for the millennial interest. A study on 96,056 individual investors published in September 2019, in the journal of Economic Letters suggested that the dealing in cryptocurrency was driven by excitement by the younger age groups, while older generations, especially investors aged over 45 years, placed more importance on actual investment.

Cryptocurrency is finally gaining traction among these real investors. This has given rise to a trend of newer technologies targeting the elder investor. Although still in works and surrounded by controversy, Facebook's cryptocurrency Libra would want to target its richest 40%, the users aged 45 years or above. Not just Facebook, cryptocurrencies catering only to the retirees have also entered the market. GladAge, which Investopedia calls a "decentralized senior care ecosystem" is powered by blockchain and is dedicated to retired professionals wanting to invest in cryptocurrency.

Should investors in the older age group invest in these newer cryptocurrencies? Many analysts have given their nod. While some investment veterans like Warren Buffet are "uncomfortable" by the idea of investing in a commodity that "does not yield anything", many like Matthew Murawski, a financial advisor at Goodstein Wealth Management consider it a "cool investment opportunity which may or may not work out." A risk that most investments with big returns entail.

As the 'bitcoin thrill' fades for the younger generation due to high volatility in their low-income-low-savings portfolio. Investors over a threshold age bracket are now cryptocurrency's saviours. This recent shift can be seen from the major pension funds making investments in cryptocurrency. As reported by Forbes, University of Michigan's endowment investing and Morgan Creek have turned to cryptocurrency to diversify their portfolio. A trend that other pension funds and older investors could soon follow.