When I was a teenager, it was football stickers and Beanie Babies. Today the collecting habits of young people are less benign.
During the pandemic, young people have flocked to invest in cryptocurrencies and non-fungible tokens (NFTs) – essentially digital currencies and certificates of ownership. Some have made money, others have lost their shirts – and, as i reported yesterday, regulators are belatedly considering a crackdown.
But shouldn’t we be trying to understand why crypto assets are so popular among young people in the first place?
History is filled with get-rich-quick schemes which turned out too good to be true. Charles Ponzi made them famous in the 1920s with a postal coupon scheme that paid returns to existing investors with the money of new investors, and Bernie Madoff updated the genre at the turn of the century. Hype-driven investment schemes have existed for centuries.
The latest trend is not quite a Ponzi scheme, but it is close. Cryptocurrencies are often entirely speculative and always extremely volatile.
The NFT market is so concentrated that around 9 per cent of digital art collectors – nicknamed “whales” – own 80 per cent of market value. But what makes today’s investment craze unique is that it is explicitly targeted at those least able to shoulder losses – the young – via unregulated adverts and social media influencer campaigns.
In the UK, regulators are increasingly worried about the risks these investments pose to the young…