These Gen Z crypto investors lost as much as 6 figures in crypto crash, but they double their investments
When Eric Sullivan first bought cryptocurrency, he went all in. Sullivan is from Denver, Colorado and was attending the University of Denver in the spring of 2020 when he invested all of his earnings from an accounting practice, $20,000, in digital assets, including Bitcoin, Ethereum and XRP coins. “I had saved up quite a bit of money and I just dumped it all in,” he explained. “I totally bought in and it was totally fine, this is cool. I just liked the idea of it.”
Sullivan, along with the rest of Gen Z crypto investors, excitedly watched his investment climb higher and higher each day – until it didn’t. The implosion of the crypto market began in May when the TerraUSD coin crashed, starting a chain reaction of various cryptocurrencies crashing and companies laying off employees, or shutting down altogether. What was a three trillion dollar industry in November 2021 is now a one billion dollar industry.
Sullivan, now 25 and working at a distillery in Crested Butte, Colorado, took no profits and estimates he lost hundreds of thousands in value when the crypto market crashed. “I was like, well, fk it, you know, I kind of blew it, but whatever,” he said. “Overall, it’s like water under the bridge.” Despite the initial disappointment, he remains a true believer in crypto.
Reflecting on the crash, he explained that he doesn’t feel like he lost “real” money, as he still owns the assets that fell in value. He added that since he is young and doesn’t have the financial obligations that come with supporting a family, he doesn’t think the money was a necessity. Looking ahead, he still plans to put the majority of his investments into digital assets – for him it’s an obvious decision. “I think it’s absolutely the future,” he said. “I think the technology is there.”
Gen Z, which includes people born between the mid-1990s and early 2000s, in many ways drove the crypto boom, and they fell the hardest when it crashed. Beyond the lure of making quick money, social factors also drove young people to crypto. “Crypto history is really born out of people not trusting central banks and financial institutions that were basically bailed out for what they did in the 2008 recession,” explained financial advisor Douglas Boneparth. “Crypto [represented] freedom to many people, he said.
The volatility of digital assets also provided an opportunity to earn money outside of salary earning. “The financial opportunities our parents and grandparents had for social and economic mobility just aren’t there for young people [today]. That means you have to take risks if you want to try to get ahead. I think a lot of people looked at crypto through that lens,” said Duke Financial Economics Center Policy Director Lee Reiner.
How much did young investors lose?
As the cryptocurrency market imploded this spring, seasoned experts weren’t shocked given the asset’s inherent volatility. But for many young investors, some of whom are still in school or working part-time, the scale of their losses came as a surprise.
“They were lied to by sophisticated actors, by people who knew better,” Reiner said. “It’s always those who can least afford it that’s left holding the bag in the end when there’s one of these bubbles or scams because the smart money gets out before it collapses,” Reiner said. In fact, several platforms that advertised plenty as safe, such as Celsius and Voyager Digital, declared bankruptcy and froze customer deposits this summer. Voyager is now facing lawsuits from customers who claim the platform is misleading investors and Celsius is being sued for engaging in fraudulent activities by a former investment manager.
For many, the crash has illustrated that the crypto market is not truly independent of the stock market and is subject to the same setbacks that made many young Americans wary of Wall Street. Yet the young investors I spoke to were overwhelmingly still invested in crypto – both literally and figuratively.
Don’t give up crypto
Josten Perez started buying cryptocurrency when he was in his freshman year at Hamilton College in 2018. His first exposure to digital assets was the meme coin Dogecoin. He and some friends in Posse, which is a college admissions program, bought some Dogecoins when the coin was in its infancy. While he sold his Dogecoin for a few hundred dollars before the coin really exploded in value, the experience was exhilarating. [of digital assets] is to give people this notion of agency and foster this environment of decentralization. I’m Puerto Rican, me and my parents, we grew up in poverty all our lives. So when you see something that can dramatically change different financial institutions and instruments, for me that’s why I like crypto,” explained Perez.
Throughout college, he used his money from his school job to invest in cryptocurrency. When it crashed, he said he lost an estimated $15,000. However, unlike Sullivan, he withdrew much of his money in Ethereum before the crash, so he was able to save a significant amount of his winnings.
Courtesy of Josten Perez
As in most crashes, even the most high-profile investors were not immune. Brian Jung, who is 23, has 1.5 million subscribers to his YouTube channel that covers a variety of personal finance topics, including cryptocurrency. He is also an investor and started buying cryptocurrency in 2015. He explained that he has lost several six-figure values from his digital assets since the crash. He had also put $30,000 into Celsius before it went bankrupt in mid-June. “When it happened, I felt like a viewer or just any other investor. This is money that I’ve worked hard for that I’m not getting out. I know for my viewers that this has happened to them as well,” explained he.
Jung explained that about four weeks before Celsius crashed, founder Alex Mashinsky contacted him and asked to be interviewed on Jung’s channel. At the time, Jung declined because he generally doesn’t promote specific business ventures on his channel, but not because he thought anything was wrong with Celsius. “When he reached out, I didn’t think he reached out because he wanted to save his name or try to do damage control before it happened,” Jung explained.
For Jung, who has made millions on YouTube, the crash does not affect his access to liquidity or his daily life. While he understands why many of his viewers are devastated by the crash, he advises them to hold on to their assets and wait for the market to turn around. “Even though we had the huge crash, I think the crash is still generally good for the market. If we want to grow to the potential of crypto, we need all these scams and pyramid schemes to go away. It’s unfortunate because at the end of the day, those who really hurting the investors, retail, Jung said.
Jung said his cryptocurrency content on YouTube has seen fewer views in recent months since the crash, which he interprets as many retail investors losing interest after taking some losses. Still, the viewers who have gone “crazy bullish” are according to Jung. “If I say anything semi-bearish or even neutral at all, they’ll go in and say, ‘No, Brian, like crypto is going to be.’ They are firm believers,” Jung said.
What role does crypto play in a responsible investment strategy?
The question that remains for many: is it a good idea to invest in crypto? Unprotected without extensive regulation, young crypto investors are prime targets for widespread fraud, misinformation and ponzi schemes. Even with improved regulation that many hope will come, the asset is inherently volatile.
Reiner doubts that any cryptocurrency is a useful investment. “For cryptocurrency to have any value in the long term, it needs to provide real economic benefit to people. It needs to improve on some product process services in the real economy, and we just haven’t seen that yet,” explained Reiner.
While not all cryptocurrencies will survive, Boneparth believes digital assets as a whole are here to stay. Boneparth said a five to ten percent allocation in a diversified portfolio would make sense for many people interested in gaining exposure to digital assets. According to Boneparth, Bitcoin is the option that looks like it has the most staying power. Reiner said he wouldn’t advise anyone interested in cryptocurrency to allocate more than five percent of their portfolio. “
Despite the chaos that comes with the asset, many young investors are as committed as ever. “There’s still a lot of money and talent and interest in this space. These people are going to continue to build, and maybe on the other end of it, you’ll see something that’s genuinely economically useful. I just don’t see that happening, Reiner said.
Perez is not only investing money in crypto now, but has made the space part of the first step in his career. Perez now works as a customer service manager at cryptocurrency workspace in SoHo, Empire DAO. He still invests in cryptocurrency, and while he has criticisms of the hyper-capitalist mindset he sees in the industry, he remains largely bullish. “You know, now the money’s down and I actually have a job, I’m going to buy a lot more,” he explained. “I still think the real money in crypto hasn’t even been made yet,” he said. “And for me, again, it’s not really about the money.”
