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Don’t just follow trends: GenZ, altcoins, cryptocurrencies and what not to trust

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Gen Z are emerging as one of the world’s most meaningful groups of investors today as they are afforded easier and greater access to investing than any other generation before them. They’re also a generation driving some of the investment landscape’s biggest and newest trends.

This is propelled by their greater appetite for risk, advanced technological know-how, and growing agency within the space. Some of which is owed to them having less reliance on guidance from financial advisors and other wealth and asset managers. One of these trends is the rise of fad investments wherein people base their investment decisions on what is currently popular or “trending” regardless of any concrete information around that investment, such as the sales figures of a company.

In particular, fad investments such as meme stocks and coins have risen in popularity in the investment space over the last few years. Meme coins, which started out as a joke, are essentially just cryptocurrency inspired by highly shared images, videos or pieces of text that use humour to represent an idea on the internet. One of the most popular and well-known examples of meme coins is Dogecoin, which today has a market capitalization of around $78 billion “is consistently in the top ten cryptocurrencies ranked by market capitalization.

But, with investments like meme stocks and coins on the rise once again, it’s important to not get caught up in the hype and remain cautious around investments solely driven by what is “in vogue” on the internet at that moment.

The risk of investing in what’s artificially in demand

The success of meme coins like Dogecoin has led to an oversaturation of the crypto market, with more than 300 meme tokens now available in the market. While investing in the more well-known or successful meme coins like Doge, Shiba Inu and Cumrocket (yes, that’s really what it’s called), can yield some good returns as short term momentum trades, they’re not that great of an investment in the long term. Furthermore, many of these coins are rife with a number of scams and it’s best to stay away from them if you want to avoid that risk.

Additionally, meme coins are most likely an indicator of widespread financial degeneracy, rather than a healthy market, as people would unlikely be able to afford to throw money at what is essentially a “joke” within a normal economic climate. The causal agent for this is most likely loose monetary policy, which has basically made the price of money free with near zero % interest rates. But, as rates climb, we can expect to see many of these meme coins fold and vanish into the abyss. The only way these coins are able to survive is through constant trading activity, but when people are pushed to allocate their capital carefully as a result of a high interest rate environment they will most likely allocate capital to real value like Bitcoin.

Stick to safer, credible investments

The world is in a crazy place right now, rife with nihilism, misallocation of capital due to artificially low interest rates and rampant money printing. This is all a recipe for disaster, which we saw come to fruition recently with the crash of cryptocurrency exchange FTX, one of many clear signs that the cryptocurrency bubble is currently popping.

In a crypto environment where there is always a plethora of schemes looking to suck unwary investors into risky trades they don’t understand, it’s better and safer for investors to stick to investing in Bitcoin over the long-term.

As the original cryptocurrency, it’s important to remember that most, or all, other coins on the market are merely trying to replicate what Bitcoin has already done. The key difference between Bitcoin and other coins is that energy is required to be expended to mine Bitcoin. Therefore, the algorithm governing Bitcoin cannot be cheated in spite of the best efforts of any politician, banker, or venture capital investor. This is why Bitcoin can serve as an anchor to reality during these volatile times. What is important to remember concerning Bitcoin is that the price is the least interesting part of it. Over the short term, price volatility can be disconcerting, but long term the fundamentals of Bitcoin clearly shine through above all others, the primary being that its supply cannot be inflated and its consensus mechanism cannot be gamed by those in power.

Although it can be extremely enticing to jump on the bandwagon of an investment building up to its peak as you watch a few people suddenly make significant returns on the sharp and unexpected popularity of a new coin or stock, these peaks always come crashing down, hurting most of the people who took a chance on the excitement. The risk is just never worth the hype.

By Ricki Alradice, Head of Product at upnup

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