Can this trend thaw the crypto winter?

It’s plain and simple: Cryptocurrencies are growing in popularity. The proof is in the numbers. A recent study conducted by Bank of America (BAC 0.34%) shows that more and more young investors are driving growth in the new asset class.

The published report observed 1,000 individuals with a net worth of at least $3 million and aimed to better understand current investment approaches among different age cohorts. The participants were divided into two age groups; those aged 21 to 42, and those 43 and older. And you can probably guess that among the younger demographic, traditional investment methods are being challenged.

Before we go into the study, we should provide a disclaimer. A net worth of $3 million is clearly not the norm. However, following the behavior of wealthy investors can provide insight into which assets are growing in demand. As more capital flows into an asset class, it gradually becomes less speculative and then becomes more mainstream for all investors.

Out with the old, in with the new

One of the most shocking findings of the study showed that 75% of investors in the younger age group do not believe it is possible to achieve above average returns by investing in stocks and bonds alone. Only 32% in the older cohort shared this belief.

So if younger generations don’t think stocks and bonds are viable assets, what are they investing in?

Bank of America found that the alternative assets targeted by younger investors include private equity, commodities, real estate and cryptocurrencies. Furthermore, this younger group allocates about half as much of their portfolio to stocks (25%) than their older counterparts (55%).

Most interesting was which asset class younger investors believed had the greatest growth potential in the future. Unsurprisingly, the younger investors believe that crypto has the greatest growth opportunity, and almost half of the investors surveyed currently own some.

Bank of America concluded its survey by summarizing a key factor that could further drive the rise of cryptocurrencies: One of the largest generational wealth transfers is set to occur in the coming decade. It is estimated that somewhere around $84 trillion is expected to pass from Baby Boomers to Gen X and Millennials by 2045. A shift of this magnitude will fuel younger investors to follow the newer strategies that are becoming more apparent.

Numbers don’t lie

Don’t think Bank of America’s study is comprehensive enough? I have more numbers for you.

One of the most informative metrics we can use to quantify this growing trend is the number of digital wallets created. Since blockchain data is open source, we can look directly at the data to see how much growth is happening. Let’s focus on Bitcoin (BTC -0.74%) and Ethereum (ETH -0.44%) as these are the most valuable cryptocurrencies by market cap.

The number of Bitcoin wallets between 2019 and today has increased from around 460 million to more than 1 billion, roughly a 117% increase. Due to its role in decentralized finance (DeFi) applications such as lending, staking and NFTs, the number of Ethereum wallets has also skyrocketed. Since 2019, the number of unique Ethereum wallets has gone from 77 million to more than 208 million today.

As some of the most high-profile cryptocurrencies, it makes sense that Bitcoin and Ethereum have seen some of the biggest growth in recent years. Furthermore, if the trends discovered in Bank of America’s study continue to materialize, then these cryptocurrencies have the most to offer investors in the coming years.

Cryptocurrency is in a similar position to the internet in the 1990s and Big Tech in the 2010s. During these periods, these technologies were developed by the younger generations before becoming mainstream. Recognizing this trend early is an easy way for investors to capitalize on lucrative returns in the coming decades. Fortunately, it is not too late to take advantage of this opportunity.

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