Why Friend Recommendations are the Main Drivers of Crypto Investment in 2022

According to a recent joint study released by the Financial Industry Regulatory Authority’s Investor Education Foundation (FINRA) and the University of Chicago NORC, nearly one-third (31%) of new crypto investors in 2022 chose “friend recommendations” as the main reason for their purchases. In contrast, among more traditional assets such as stocks and bonds, the proportion of new investors is 8%. According to this study, this difference indicates that the social factors of cryptocurrency investment are not significant in stock or bond investments.

Report: 31% of new crypto investors in 2022 will use ‘friend recommendation’ as a reason for purchase

Cryptocurrencies have been gaining a lot of popularity in recent years, with more and more people looking to invest in the market. According to a recent joint study by the Financial Industry Regulatory Authority’s Investor Education Foundation (FINRA) and the University of Chicago NORC, nearly one-third (31%) of new crypto investors in 2022 chose “friend recommendations” as the main reason for their purchases. This is a stark contrast to traditional assets such as stocks and bonds, where the proportion of new investors stands at 8%.

The Trend towards Social Investing

The emergence of social media and other networking tools has completely transformed the investment sector as it has enabled people to share information about their investment choices more easily with others. This has given rise to a new phenomenon known as social investing. Social investing involves the sharing of investment opportunities among friends and acquaintances, usually through social media platforms and messaging apps.
With cryptocurrencies, social investing has become even more prevalent, as people find it easier to trust investments recommended by their peers who have already invested in the market. Additionally, cryptocurrencies are more volatile than traditional assets, which makes them a popular topic of discussion among friends as they seek to take advantage of market fluctuations. As such, the role of “friend recommendations” in the crypto market is significant and should not be overlooked.

Why Friend Recommendations are More Significant with Crypto Investments

One of the main reasons for the prevalence of “friend recommendations” in the crypto market is the complexity of the market. Unlike traditional assets where investment decisions can be based on research and analysis, the crypto market is highly volatile and subject to sudden price movements. This has made it difficult for new investors to enter the market without advice and insights from those with more experience.
Furthermore, cryptocurrency investments are often viewed as high risk, high reward opportunities, which makes investor referrals even more vital. Investors who have benefited from their investments typically share information about the investment with their friends, which makes it easier for new investors to make informed decisions.

The Influence of Social Media Platforms

Social media platforms have enabled the sharing of information about investments to be done more effectively. This is because social media platforms such as Twitter and Reddit are designed to enable the sharing of information in real-time. As such, investors can share information about investments immediately and receive feedback from their peers.
Social media platforms have also made it possible for investors to form communities around specific investments. For example, investors can join cryptocurrency trading groups or subreddits and discuss the latest trends in the market, share investment insights and strategies, and provide feedback to one another.

The Role of Investment Platforms

Investment platforms like Robinhood, Coinbase, and Binance have also played a significant role in the surge of friend recommendations among crypto investors. These platforms have a social component that enables investors to follow and copy the trades of others on the platform. This makes it easier for new investors to access information about the trades of more experienced investors.
Another factor that has made investment platforms more popular is the ease of use, low-cost fees, and accessibility they offer. These platforms have enabled people to invest in cryptocurrency with ease, using their smartphones or desktops. This convenience has made it easier for investors to take advantage of market opportunities with the guidance of their friends.

Conclusion

The rise of cryptocurrencies has given birth to a new approach to investing, one that is heavily reliant on social recommendations and referrals. This phenomenon has been facilitated by social media platforms and investment platforms that enable investors to share information and copy trades. While social investing can help new investors make more informed decisions, it is crucial to remember that investment decisions must always be based on independent research and analysis, even when taking into account the opinions and recommendations of friends.

FAQs

1. How reliable are friend recommendations for cryptocurrency investment?
Friend recommendations are essential in cryptocurrency investment, especially for new investors. However, it is important to remember that investment decisions should always be based on research and analysis, even when taking into account the opinions of friends.
2. Are investment platforms like Robinhood, Coinbase, and Binance safe for investing in cryptocurrencies?
Yes, investment platforms are generally safe for investing in cryptocurrencies due to their rigorous security measures. However, investors should always do their due diligence before investing in any platform.
3. How does social investing apply to other areas of investment?
Social investing can apply to all areas of investment, not just crypto. It involves the sharing of information about investments among friends and acquaintances, usually through social media platforms and messaging apps.