The COVID-19 pandemic has impacted our lives in almost every way, from changing the way we interact with one another to forcing us to change careers or even retire.
The pandemic has also changed institutional and private investors’ choice of investments. Many now favor less risky assets, such as gold and hard currencies, due to the greater economic uncertainty of the predicament we now find ourselves in.
However, not all investors are lowering their risk exposure. In fact, many are going after larger returns by investing in cryptocurrencies, such as Bitcoin (BTC), hoping their value will skyrocket and generate a huge return for them.
In particular, Baby Boomers have been switching out stocks for cryptocurrencies during the pandemic, with a recent survey finding that approximately 20 percent of Boomers in the UK now own crypto.
Researchers believe the situation is similar in the US, though a comparable survey is yet to be conducted.
Why Are Boomers Investing in Crypto?
Some crypto exchanges are actively rolling out measures to help Boomers invest. Coinfloor, the UK’s longest running crypto exchange, is one of these companies, and their founder and CEO, Obi Nwosu, said, “There is a misconception that bitcoin is only for millennials: that it is complex, riskier than other investments, and requires a high degree of technical knowledge.”
But, in reality, Bitcoin is an investment and a tool for everyone, he insisted.
While it may seem counterintuitive to be investing in highly volatile crypto assets amid all the economic fallout the COVID-19 pandemic has created, there is a good deal of logic to it. However, it’s still a risky endeavor.
Firstly, because most central banks have slashed interest rates in a bid to stimulate their respective economies and help businesses get by during these economically turbulent times, leaving your money in a savings account will generate a negligible return for you.
In fact, it’s more likely to generate a negative return than a positive one, once the effects of inflation are taken into consideration.
Secondly, because the stock markets have no clear direction now – and are exhibiting volatility levels very rarely seen for the equities market – Boomers who relied on shares to generate good returns are now looking elsewhere.
As mentioned, many are now looking to cryptocurrency trading and investing, as many of the most liquid digital currencies haven’t been hit particularly hard by the pandemic and still offer great earnings potential their very high volatility.
A Quick Summary
- The financial chaos caused by the coronavirus pandemic has pushed investors towards safer assets, such as gold and the US Dollar. Still, some investors are actually investing in especially volatile and risky assets now.
- Boomers aren’t an exception to this trend, with one in five Boomers in the UK now holding a crypto investment, according to a recent survey.
- It may seem illogical to be investing in such volatile assets during the pandemic, but there is some sound reasoning to it.
- For example, many savers are now looking for investment opportunities due to interest rates being either negative or very close to zero.
- Another reason for the increase in crypto investing during the COVID-19 pandemic is the uncertain state of the equities markets, with most indexes not being in a clear bull or bear run and experiencing very high levels of volatility due to various factors which aren’t related to the underlying performance of the listed companies.