Dogecoin's Sharp Rebound... Why Are Young People Flocking to Cryptocurrency?
Investing in Coins Despite Risks for Home Ownership and Retirement Security
Investor Concerns Include 'Financial Stability Risks' Due to Crypto Asset Volatility
[Asia Economy Reporter Kim Choyoung] The number of people in their 20s and 30s flocking to cryptocurrencies such as Bitcoin, dreaming not only of owning a home or securing their retirement but also of striking it rich, is rapidly increasing. As of the 15th, the volume of cryptocurrency transactions has surpassed the combined scale of domestic stock investments and overseas investments. It is known that young people are drawn to cryptocurrencies partly to overcome their current unstable lives and prepare for retirement.
Experts have warned that "investing in cryptocurrencies with no intrinsic value, especially altcoins like Dogecoin whose trading volumes are completely uncontrolled, is risky," but the cryptocurrency craze does not seem to be cooling down anytime soon.
As of the 15th, the daily cryptocurrency transaction volume in South Korea was about $21.63 billion (approximately 24 trillion KRW), showing a strong trend surpassing the combined amount of domestic stock investments and overseas investments (about 21 trillion KRW). In particular, Dogecoin, a type of altcoin, is gaining great popularity among retail investors due to its higher volatility compared to Bitcoin.
Altcoins are a compound word combining 'alt' from 'alternative' meaning 'alternative' and 'coin,' referring to cryptocurrencies other than Bitcoin that can serve as alternatives to Bitcoin.
On the 17th, Dogecoin's daily transaction amount exceeded approximately 17 trillion KRW, surpassing the previous day's KOSPI trading volume (15.5421 trillion KRW) and the average daily KOSPI trading volume in April (14.9372 trillion KRW).
This cryptocurrency craze is particularly prominent among the 20s and 30s generation. According to IGAWorks, a mobile big data analytics company, the monthly active users (MAU) of cryptocurrency apps exceeded 3 million for the first time in February this year. Among them, the 20s and 30s accounted for 59%. This is a significant increase compared to the 46.8% reported by WiseApp in January.
This is also related to the anxiety among young people who currently cannot properly prepare for retirement in Korean society. According to the '2020 Household Financial Welfare Survey Results' released by the Bank of Korea in December last year, as of the end of March 2020, households under 39 years old (28.6%) had the highest debt-to-asset ratio among all age groups. This can be seen as caused by the relatively high proportion of financial debt compared to savings among young people, whose net asset ratio is inevitably low.
Moreover, as the COVID-19 pandemic prolonged and the job market froze, worsening economic conditions have heightened the sense of crisis among young people, which can also be seen as a reason why the 20s and 30s are flocking to cryptocurrencies. According to a report titled 'Millennial Generation, the Emergence of a New Investment Tribe' released by Mirae Asset Retirement Research Institute, the reason young people show interest in financial investment is analyzed as "Millennials prioritize raising funds for home purchase and accumulating retirement assets."
In fact, the 20s and 30s generation responded that they invest in Bitcoin to achieve high returns amid a low-interest-rate environment. Kim, a worker in his 20s, said, "I recently started investing in Bitcoin because many around me recommended it, saying they made huge profits," emphasizing, "I am satisfied because the return rate is higher than when I invested in stocks, with a 120% increase in just one day."
A worker in his 30s, Ahn, said, "I started out of curiosity, but recently I have unexpectedly made significant profits, so I think it was good to start early," adding, "Although I worry about when the price might fall, I am reassured because I am currently seeing profits. Without Bitcoin, I would have found it difficult to decide to buy a house."
Dogecoin, which is very popular among the 20s and 30s generation, is a type of altcoin referring to cryptocurrencies other than Bitcoin. Dogecoin belongs to the non-mainstream among altcoins. Unlike Bitcoin, which has a limited issuance volume, Dogecoin has a loose structure. Its issuance volume is unlimited, with about 10,000 coins produced worldwide every minute.
Meanwhile, earlier this year, Dogecoin's price surged simply because Elon Musk, CEO of Tesla, posted on his social media (SNS) that "Dogecoin is the future" and "I bought Dogecoin for my son."
On the 15th, Musk posted on SNS, "The dog is barking at the moon," which caused speculative demand to surge. Dogecoin, which traded at about 0.5 cents at the beginning of the year, soared to about 36 cents, approximately 70 times higher, before falling more than 20% on the 17th.
Given this situation, concerns about the value of Bitcoin continue to be raised. Lee Ju-yeol, Governor of the Bank of Korea, expressed concerns at an online press conference held after the Monetary Policy Committee meeting on the 15th, saying, "It is extremely difficult to determine the appropriate value or price of crypto assets, and their price volatility is very high," adding, "If crypto asset investment becomes excessive, there is a possibility of loan defaults to investors, and the risk is significant from a financial stability perspective."
Earlier, on the 14th (local time), Jerome Powell, Chairman of the U.S. Federal Reserve, also stated in an interview with the Washington DC Economic Club, "Cryptocurrencies are really a means for speculation," and "They are not actively used as a means of payment."
Experts analyze that the Bitcoin craze is a movement arising from the various realistic difficulties faced by the 20s and 30s generation. Professor Lee Byunghoon of Chung-Ang University explained in an interview with MBC, "Even among older generations, people who are economically struggling have turned to lotteries and lotto. If we connect and understand it that way, the cryptocurrency syndrome among young people can be understood as directly linked to their hardships, employment difficulties, and financial struggles."
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