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The crypto market is maturing and becoming more complex, so if you want to make money on investments in cryptocurrencies you have to master financial literacy. Let’s study this case together with the AlsaBot team to find out how and why we should constantly keep on study!
The risk to lose everything
Now many investors are blindly pouring money into crypto projects, having only superficially familiarized themselves with them. They risk losing everything. The crypto market is maturing and becoming more complex, so those who want to make money on investments in cryptocurrencies have to master financial literacy. It directly affects the quality of investments and, ultimately, the success of the investor. Cryptocurrencies are gradually coming to the masses, but mass illiteracy, uncertainty and disinformation continue to reign in this market. It is still not uncommon for many people to invest in projects with only a superficial understanding of them. As a result, such investors lose money. In 2022, Cruptoliteracy an active consumer educator on digital assets, conducted a cryptocurrency literacy test among 1,000 respondents in the United States, Brazil, and Mexico. All of them had some understanding of the crypto industry. However, 91% of the respondents failed at the first stage of testing. These are alarming statistics and indicate that many in the market are driven by pure speculation. This means that many investors come to the market only for a short time, and a significant part of the hype in the crypto market is provoked by media hype. Many do not understand the value of projects and cryptocurrencies in which they invest. All this is fraught with further high volatility.
The hype around investments
The hype in the crypto industry does not subside, flashing in one or another segment. New entrepreneurs and projects are constantly emerging offering promising solutions and crypto products. However, on the crest of a wave of such a hype, scammers always strive to ride. They, too, are on the alert and tirelessly develop questionable tokens, NFTs, and other schemes. There is also a common belief that any cryptocurrencies are illegal in principle. Indeed, in some countries, the crypt is banned. However, for the most part, its problem lies in the lack of regulation. Therefore, every time a new project or product appears on the market, it usually does not rely on any existing regulatory framework. Accordingly, there are no laws that would protect careless and inexperienced investors. In the period from 2014 to 2018, the only way to learn something about the crypto industry was through specialized forums on the Internet. There you could ask a question and then just believe those who answered the word. Gathering information was very difficult. Since then, the crypto industry has become more structured. More and more participants are trying to make life easier for new investors who are just looking around and deciding whether to leave their money here.
Crypto literacy and technological innovation
Crypto literacy should be mastered not only by ordinary users of cryptocurrency, but also by financial regulators. They also need to work hard to understand what and how works in this industry, and what does not work. Regulators cannot and should not decide such issues in a vacuum, sitting in the quiet of an office and discussing there what solutions are most appropriate for society. Technological innovation goes hand in hand with crypto literacy. At the dawn of the 2000s, business began to massively move to the online format, and this affected all generations. Everyone was forced to get acquainted with this innovation and accept a big change in everyone’s life – the transition from offline to online. Now the rapid development of technology is taking us – and our money – to a new level of digitalization. The crypto space is rapidly evolving. New projects and coins are constantly appearing. In such conditions, it is especially important to carefully analyze projects and tools before investing money. According to Bybit and Toluna’s crypto investment literacy survey, the way crypto investments are analyzed and collected is somewhat different from more traditional types of investment. The survey was conducted among 10,500 respondents in 19 markets. 1,748 of those surveyed were described as « crypto investors ». The main goal of the study was to understand the scope of cryptocurrency literacy. For this, a large number of different categories were used, such as the interests of the respondent, the motives for his choice when making an investment decision, investment goals and ambitions, investment horizon and risk management strategy. In particular, the experts were interested in exactly how the respondents collected and studied information about the project and how much time they spent on it before investing in crypto.
As it turned out, most Americans were just blindly buying cryptocurrencies without doing any research at all. 64% of North Americans spent less than two hours doing this analysis. When choosing a project for investment, a significant part of the respondents relied on such reputational factors as the credibility of the founder, the popularity of the project’s supporters, or the response about it in the media. A much smaller number of respondents studied technical factors, such as the consensus algorithm used, the project’s blockchain or its tokenomics. Meanwhile, reputational factors are a thing that can be easily manipulated. They can be very deceptive, and this was once again confirmed by the recent resonant collapse of the FTX crypto exchange, which at one time attracted a huge amount of investments worth billions of dollars. The domino effect after the collapse of FTX still continues to collapse crypto companies. Such stories once again remind of the importance of a critical approach and the mandatory study of materiel, or, as it is called in the crypto community, the “DYOR” procedure (“Do Your Own Research, conduct your own research”). The results of the Bybit survey showed another interesting point. Representatives of the “boomer” generation show much more caution when deciding to invest in one or another crypto project. This category averages 20% more sanity than any other generation, as boomers pay more attention to the technical aspects of the project. Follow us on our Telegram channel and let’s us be your guide into most exciting news of crypto world!
