Research on crypto investments is lacking; DYOR before diving

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Crypto investment literacy remains a top priority as the cryptocurrency market continues to mature. Many investors currently only look for a few signs before blindly investing their money. This can lead to permanent damage to their wallets and livelihoods.

Among the many essential livelihood skills, financial literacy is important. Despite its growth in adoption, the crypto landscape is full of fear, uncertainty, and doubt, along with misinformation.

In 2022, CryptoLiteracy.org, an industry initiative promoting broad consumer education about digital currencies, hosted a crypto literacy quiz for 1,000 crypto-aware respondents in the United States, Brazil, and Mexico. . 91% failed the preliminary test. This is a disturbing statistic, signaling that people are in this market for pure speculation.

This suggests that many of these investors are either short term or social media hype is driving much of the market. It also hints at potential future volatility, as investors need to understand the true value proposition or cryptocurrencies before jumping in.

Understanding the Hype of Crypto Investing

There is substantial hype surrounding Bitcoin, Ethereum, and the crypto space as a whole, and promising entrepreneurs are building themselves in this sector to create solutions and products. However, bad actors try to take advantage of this hype, creating dodgy plays, NFTs, and other schemes.

There is also a common misconception that cryptocurrencies are illegal. Crypto is not illegal in most countries. However, it is also mostly unregulated. So, whenever we talk about new things being introduced in this industry, there is usually no regulatory framework to protect unwitting investors.

Between 2014 and 2018, the only way for individuals to learn about the industry was through forums, posting questions, and taking people to their word. It was not easy to gather information. Since then, the industry has become more structured, with more people and groups stepping up to help new investors looking to get started.

The Ever-Growing Crypto Space

Beyond educating the common man, it is becoming increasingly important to educate regulators. There are a lot of things they need to define which parts work and which don’t. Regulators cannot and should not operate in a vacuum, having informal discussions about what is best for the public.

Technological innovation has a huge role to play in enabling crypto literacy. In the early 2000s, it was all about moving businesses online. It affected all generations. Everyone was naturally driven to learn and embrace this shift from offline to online connectivity.

Rapid technological innovations in this new era of digital connectivity will allow us to take connectivity to the next level, including our finances.

Importance of Financial Literacy

With the thousands of cryptocurrency projects and respective coins or tokens in this space, it is more important than ever to do proper research before investing. According to the Bybit and Tolunas Crypto Investment Literacy report, the methods of researching crypto investments are not quite the same as other more traditional investments.

According to findings shared with BeInCrypto, out of 10,500 unique respondents across 19 markets, 1,748 identified themselves as crypto investors. The main objective of the survey was to understand knowledge about cryptocurrency. Specifically, the methods and time respondents spent researching before investing in cryptocurrency.

Crypto investment literacy framework Source: Bybit

At the heart of the findings, the survey revealed that most Americans blindly bought cryptocurrencies with virtually no research. This is evident in the graph below. It shows that 64% of North Americans spent less than two hours researching before investing in a crypto project.

Time spent on due diligence Source: Bybit

A significant number of investors said they chose projects based on reputational factors such as credibility of founders, names and credibility of supporters. Others looked at technical factors such as goal and consensus algorithms.

Key factors to consider before investing (top 3 factors in each category highlighted in red) Source: Bybit

However, reputation factors can be manipulated and misleading. An example of this is the billions of dollars that have been invested in the FTX exchange and its respective FTT token. The exchange’s collapse created a wave of financial losses for investors around the world. This shows the importance of DYOR or doing your own research.

When it comes to age brackets, baby boomers have taken a more cautious approach before putting money into the game, looking like risk-savvy investors. Baby boomers, on average, are 20% more savvy than other generations because they place more importance on technical variables. 34% of baby boomers spend days researching a particular project.

Disclaimer

All information contained on our website is published in good faith and for general information purposes only. Any action the reader takes on the information found on our website is strictly at their own risk.

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