Crypto Young Investors: BaFin Study Reveals over 50% Trust Social Media and Finfluencers

A recent study by BaFin indicates a growing trend among
younger investors. Many individuals aged 18 to 45 are turning to social media
for financial information. This shift is particularly evident in the land of
cryptocurrencies, which are gaining popularity among these groups.

Young Investors Trust Social Media

In May 2024, BaFin conducted a survey involving 1,000
consumers who had invested in the past two years. The findings reveal that
social media, especially platforms like YouTube and Instagram, is increasingly
seen as a reliable source for financial guidance.

Over half of the respondents
from generations Y (Millennials) and Z (Gen Z) consider social media a good
alternative to traditional financial advice.

This trend is mirrored in their investment behaviors. Users
who engage with social media have diversified their portfolios more than those
who do not. Specifically, these investors have expanded into a variety of asset
classes, with notable increases in securities and crypto assets.

Generational Shifts in Investment Preferences

The survey highlights generational differences in investment
preferences. Millennials tend to favor traditional investments, such as call
money and fixed-term deposits. In contrast, Gen Z shows a stronger inclination
towards cryptocurrencies and precious metals.

The popularity of crypto assets
has surged; 32 percent of respondents reported investing in them in the past
two years. This marks a significant increase from just five percent noted in a
prior OECD survey two years ago.

Finfluencers Shape Investment Decisions

The correlation between social media usage and crypto
investment is striking. Among social media users, 43 percent have invested in
crypto, while only 25 percent of non-users reported similar investments. This
suggests that social networks play a critical role in shaping investment
decisions, particularly regarding cryptocurrencies.

Finfluencers, or social media influencers who provide
financial advice, are impactful in this context. More than half of those
surveyed have sought financial information from finfluencers. Almost 90 percent
acknowledge that these individuals offer investment tips, predominantly focused
on stocks and crypto assets.

Links Influence Purchase Decisions

The impact of finfluencers extends to actual investment
actions. The study found that 80 percent of respondents who follow finfluencers
also noticed links to investments provided by them. Of those, 57 percent made
purchases directly through these links, while an additional 25 percent invested
but did not use the provided links.

Despite their influence, finfluencers are not currently
required to disclose their financial relationships or compensation related to
the tips they provide. The survey revealed that many young investors are
unaware of the potential for compensation.

About 37 percent did not know that
finfluencers typically receive payment for their recommendations. Among those
who purchased products via a finfluencer’s link, 15 percent were unaware of the
compensation practices.

This article was written by Tareq Sikder at www.financemagnates.com.