The technology of the distributed ledger and the most vivid financial manifestation of it in the form of cryptocurrencies appeared at a time when the global society was full of dissatisfaction with the way the issues affecting the essence of the socioeconomic arrangement were being solved. This causes a crisis of confidence in centralized institutions, as Congressman Jared Polis talked about. In addition, the report of the Bank for International Settlements, which does not support cryptocurrencies, nevertheless stated that it is necessary to value the trust factor, and cryptocurrencies have already become a new magnet of public sympathy. If regulators try to "crush" cryptocurrencies, this will cause a loss of public confidence in the markets of crypto coins and, as a result, "can lead to the disappearance of confidence in the financial system in the broad sense and its regulators."
Millennials Do Not Trust Banks and Securities
Sympathy for the traditional institutions of the financial market is already minimal. It is no coincidence that in such an international financial center of the world as London, 30 percent of residents intend to invest in cryptocurrencies. Note that this figure in the U.K. capital is twice as high as the national average. Sharply sensing the pulse of financial life, Londoners are particularly aware that it is time to get into cryptocurrencies.
The British of the millennial generation (that is, those who are now from 22 to 37 years old) and Generation Z (those who are now under 22) are most interested (37 percent) in investing in cryptocurrencies, in contrast to older generations, generation X (37 to 51) and the first post-war generation, where only four percent are ready to do so. Why is that? Thomas Lee explains this by saying that millennials do not like banks in principle. And here, the question is not so much in the technological aspect of backwardness, but that cryptocurrencies allow realizing value transfers without any middlemen, which in itself transforms the world around us, as John McAfee reminds us in his “most interesting” interview.
The matter is somewhat different as explained by Thomas Lee at the ChainXChange conference in Las Vegas, "the millennials remember how their parents [from generation X] lost their homes during the financial crisis." And in the end, according to Lee's estimates, 60 percent of millennials and 70 percent of generation X tend to minimize communication with banks and interact with them only online. This data is confirmed by other studies, in particular, those conducted by Facebook and First Data.
This approach and its predominance among the two generations is the basis for the massive development of cryptocurrencies. Millennials under the age of 30 and the next Generation Z are ready more than anyone to invest in cryptocurrencies, explaining this by the fact that securities appear to be high risk, which means, unreliable assets.
Real Estate? No. Cash Is a Temporary Solution
Note that millennials are disappointed not only by banks and securities. A study by Get Living showed that 21 percent of Britons from this generation (or 27 percent of male millennials) said that they would rather buy cryptocurrencies than invest in real estate, perceiving the latter asset as "high risk," as 57 percent of respondents stated. Real estate has ceased to be an important asset for this generation, but freedom of movement and communication is valued above all else, hence the preference for renting a home rather than buying it. The millennials were made "a generation of tenants" not only by this but also by the crises through which their parents have passed.
Global studies confirm these local trends. Thus, in Capgemini's World Wealth Report 2018 it is noted that 25 percent of the millennials who have a net wealth position (owning a larger number of funds than they owe) are interested in investing in cryptocurrencies. 39 percent note that the main thing in such investments is investment income, and 19 percent consider this as an option for saving funds. In the economically turbulent South America, the share of such millennials interested in cryptocurrencies amounts to an impressive 60 percent. This confirms the thesis that the countries of this region are capable of becoming new points of growth in the spread of cryptocurrencies.
Millennials and Generation Z do not like banks, securities, and investments in real estate, which forces them to opt for cash or funds in their digital wallets to invest their money. It is clear that this is a temporary solution, as hundreds of millions of people are at a crossroads trying to understand what to do. After all, if cash remains a means of accumulation, only six percent are ready to pay using it.
Cryptocurrency Will Replace Fiat
The pendulum is swinging in the direction of cryptocurrencies. According to a YouGov poll, 48 percent of youth do not see any problems in making the world switch to cryptocurrencies instead of fiat. In fact, this is a powerful request for a change in the modern financial system, which forms the youngest and most active part of society.
It is also important that the dollar ceased to be an authority. If we use the U.S. Bureau of Labor Statistics calculator, one dollar in January 1913 is now equivalent to $25.67. It is not surprising that a great interest in earning money on cryptocurrencies, but not necessarily as an object of long term investment, is manifested in all strata of society. The generations of millennials and generation Z include 62 percent of such adherents. Generation X includes 55 percent, and in the first generation born after the end of the second world war, there are 37 percent of people who are ready to partake in such trade. That is, despite the different perception of the world and a different understanding of what the key problems of modern society are, one can see the general vector of movement towards cryptocurrencies. And after all, it is this different understanding that is also going to be a puzzle as a single social request for the early adoption of cryptocurrency in the end. After all, the disappearance of fiat is an impending reality according to the quarterly report of Morgan Creek Capital Management.
The Crisis Is Here
The feeling of the coming of a new crisis can be traced in all social groups. For example, while 55 percent of the representatives of generation Z want to open their own business, 56 percent, that is, almost the same number, remain confident that they will be able to reach the level of wellbeing of their parents. Optimism is far lower in the youngest generation than with the millennials (71 percent). The main cause of concern for almost everyone is the total amount of the world debt, at $247 trillion, which is 2.5 times higher than the world GDP. Since the crisis of 2008, this indicator has increased by 39.5 percent. The level of indebtedness of Americans has exceeded the crisis indicator, reaching $13.3 trillion, of which $9 trillion is for outstanding mortgages, 1.5 trillion for university education debts, and 1.25 trillion for car purchase debts.
Russia has its own sense of crisis. The deteriorating situation with a reduction in borrowing capacity due to sanctions suggests that ICOs and asset tokenization are, in fact, the only way to compensate for lost ways of raising funds. "Driving" funds deposited by banks in securities, when the MICEX index was at the historical maximum, means risking that they will end up in financial "bubbles."
Millennials and generation Z are most acutely concerned about what will happen to them in retirement age. This issue is acute everywhere, and not only in Russia, and cryptocurrencies could be its solution. As the American edition of Politico emphasizes, the American young generation is worried that they will have to retire, most likely at 70, and until then, they will have to work all the time in a situation where market opportunities are increasingly shrinking due to robotics and artificial intelligence. In the U.S. and other countries of the West, the feeling is exacerbated by the fact that the previous generations have already taken on the maximum that they could in debt, and as a result of the younger generation, they will not be able to lead the same lifestyle, especially since this generation is subject to the increase in the base interest rate of the U.S. Federal Reserve, which makes loans more expensive.
The policy of the U.S. Federal Reserve, which simply printed $4.5 trillion after the 2008 crisis, led to an increase in the value of securities, but this adds up to previous generations, who most of all acquired such assets. In addition, the American young generation is displeased with high corruption, fraudulent politicians in the broadest sense of the word, as well as the reluctance of previous generations to change anything. The last statement can also be interpreted in such a way that unlike young people, older generations have not yet seen alternatives in cryptocurrencies, because the relevant information has not yet reached them.
Generation Z: The Opinion Leaders
The most susceptible to new technologies was generation Z, which is also called iGen or Coiners. Its representatives know where to move, and because of their self-righteousness, they are informal leaders in their family in financial matters 70 percent of the time, even for representatives of other generations. Instead of traditional banks, they turn to "digital banks," which enable them to save and receive loans. They are online "almost constantly," according to Pew Research 2018. This also predetermines that generation Z is increasingly moving to contactless payments.
Generation Z is very promising in terms of the development of cryptocurrencies because its representatives are on the same vibe with them. If in the United States, the share of Z is more than 20 percent of the population, and in Africa, it is the main dominant force on the continent, in Russia, because of the low birth rate in the 1990s, their share is less than 10 percent. Even this fact forces us to say that the search for a "key" to each social group is a necessary condition for the mass spread of cryptocurrencies in Russia.