The Influence of Friend Recommendations on Cryptocurrency Investment

According to a recent joint study released by the Financial Industry Regulatory Authority’s Investor Education Foundation (FINRA) and the University of Chicago NORC, nearly one-third (31%) of new crypto investors in 2022 chose “friend recommendations” as the main reason for their purchases. In contrast, among more traditional assets such as stocks and bonds, the proportion of new investors is 8%. According to this study, this difference indicates that the social factors of cryptocurrency investment are not significant in stock or bond investments.

Report: 31% of new crypto investors in 2022 will use ‘friend recommendation’ as a reason for purchase

As per a joint study from the Financial Industry Regulatory Authority’s Investor Education Foundation (FINRA) and the University of Chicago NORC, almost one-third (31%) of new crypto investors in 2022 chose “friend recommendations” as the main reason for their purchases. This percentage is considerably higher as compared to traditional asset investments such as stocks and bonds, where the proportion of investors is only 8%. This article highlights the role of friend recommendations in cryptocurrency investment, including the reasons behind this trend and whether it provides any value to investors.

Understanding the Impact of Friend Recommendations

Historically, investment advice and recommendations primarily came from professionals in the finance industry, such as brokers or investment advisers. With the rise of social media, people are increasingly relying on peer reviews and recommendations when making investment decisions.
Friend recommendations often provide greater trust and confidence for those exploring new investment options. The genuine experience sharing of someone who has taken a particular action can go a long way in creating an investor’s perception about a specific asset class.

The Trust Factor

It is no secret that today’s consumers prefer recommendations that they believe come from trustworthy sources, and friends have always been considered top of the list for such advice. Word-of-mouth remains one of the most reliable marketing strategies, and it’s therefore not surprising that people trust their friend’s opinion when it comes to financial decisions more than other factors.

The Bitcoin ‘Hype’ Factor

Cryptocurrency in general, and Bitcoin, in particular, have seen a widespread adoption in recent years, largely due to media hype and news coverage. Many people believe that cryptocurrencies could change the world’s financial system and create a revolution. This enthusiasm for crypto investment has led to more people seeking advice from their friends who are already investing in cryptocurrencies.

Conclusion

To conclude, friend recommendations play a significant role in cryptocurrency investment, with nearly a third of new investors citing it as their main reason for investing. This indicates the power and reach of peer reviews in the current digital age. However, it should be noted that just like any other investment, friend recommendations should be taken with a grain of salt, and investors should conduct their research and analysis before making any decisions.

FAQs

Q1. Can friend recommendations be relied on entirely when investing in cryptocurrencies?
Ans: No. Expertise or knowledge gained through the internet is not always reliable, and friend recommendations are no different. Investors should exercise caution and also conduct their research before making cryptocurrency investments.
Q2. Why are friend recommendations more popular in the case of cryptocurrency investments compared to other traditional investment options?
Ans: The relatively new and unexplored nature of cryptocurrency investment might make novice investors more comfortable with the idea of taking tips and advice from their friends. Additionally, the media hype surrounding Bitcoin’s exponential growth might have also contributed to this trend.
Q3. What are some other factors that novice cryptocurrency investors typically consider before making investment decisions?
Ans: Factors such as asset price, volatility, industry-specific events, security, regulations, and market trends are generally taken into account when investing in cryptocurrencies.