Finance

Crypto is Gen Z’s most common investment.

Published

2 years ago

June 7, 2023

Cryptocurrency is the most common investment held by Gen Z investors, a trend likely fueled by the cohort growing up during an age marked by technological change, social media and easier access to investing, according to a new joint report from the CFA Institute and Financial Industry Regulatory Authority’s Investor Education Foundation.

But while young people can afford to take more investment risk relative to older generations, using crypto as the linchpin of an investment portfolio is nonetheless a risky bet due to its volatility, experts said.

Also, on Tuesday, the Securities and Exchange Commission sued Coinbase, the largest U.S. crypto exchange, alleging the company was selling investment securities while not being registered to do so. The SEC sued Binance, a Coinbase rival, on Monday.

Crypto zeal a concern if investors don’t diversify

Fifty-five percent of Gen Z investors currently invest in crypto, according to the joint Finra-CFA Institute report.

Gen Z is a cohort born in the late 1990s and into the 21st century, meaning its oldest members are in their mid-20s, and the report is based on an online survey of people in the U.S. ages 18-25.

Individual stocks ranked second, held by 41% of these investors, followed by mutual funds (35%), nonfungible tokens (25%) and exchange-traded funds (23%), the report said.

By comparison, mutual funds were the most common holding among Gen X investors, a cohort born between 1965 and 1980. Forty-seven percent held mutual funds, followed by individual stocks (43%) and crypto (39%).

Gen Z’s relatively high concentration in cryptocurrency — examples of which include bitcoin and ethereum — and individual stocks “may be cause for concern” if investors aren’t adequately considering and managing risk, said Gerri Walsh, president of the Finra Investor Education Foundation.

“Whereas mutual funds and most ETFs typically offer a degree of diversification, the same is not true when purchasing cryptocurrency and individual stocks,” Walsh said.

Crypto should be a small piece of the portfolio

Gen Z is the first generation to grow up in an age of technology and social media, consuming information including investment advice from platforms such as TikTok and Instagram, said Ted Jenkin, a certified financial planner based in Atlanta.

Their enthusiasm for cryptocurrency also coincides with the growth of investment apps that let users buy with relatively small sums of money and can therefore offer more investment access to those with less disposable cash. They’ve also generally witnessed the rise of technology giants such as Alphabet, Apple and Meta and have a high degree of confidence in the continued growth of tech and the digital economy, said Jenkin, founder of oXYGen Financial and a member of CNBC’s Advisor Council.

Crypto prices stumble following new SEC lawsuit

Crypto can be a volatile asset class. For example, bitcoin has lost more than half its value since its peak around $69,000 in November 2021. It’s currently trading around $27,000.

Crypto can play a role in investors’ portfolios, especially those with a higher tolerance for risk, said Jenkin. However, they should generally limit their exposure, he said.

“There’s certainly a case for aggressive growth, but I generally wouldn’t recommend more than 1% to 3%” of a portfolio in cryptocurrency, Jenkin said.

The joint Finra-CFA Institute report doesn’t specify the average share of Gen Z investors’ portfolios allocated to cryptocurrency.

Investors should also consider it as a long-term investment meant to be held for at least 10 years, he recommended.

Gen Z investors in the U.S. view themselves as risk-takers. Indeed, 46% say they’re willing to take substantial or above-average financial risks, according to the joint Finra-CFA Institute report. And a similar share (50%) say they’ve made an investment due to the fear of missing out, which “might not always entail a careful risk assessment,” Walsh said.

SEC actions consider ‘unregistered exchanges’

The SEC’s legal actions against Coinbase and Binance this week hinge partly on “registered” versus “unregistered” exchanges.

An unregistered exchange doesn’t carry the same protections for investors as a registered one, such as the New York Stock Exchange, that sells stocks and other securities. Registered exchanges, for example, offer a maximum $500,000 financial backstop for investors if the exchange were to fail.

In a blog post, Binance wrote it was “disappointed” by the SEC action. The company said it has “actively cooperated with the SEC’s investigations” and “engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.”

Coinbase’s chief legal officer, Paul Grewal, told CNBC there’s an “absence of clear rules for the digital asset industry,” which ultimately “hurts companies like Coinbase that have a demonstrated commitment to compliance.”

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Crypto

Bitcoin’s Recovery – the Downturn Is Over

Published

5 months ago

July 16, 2024

The market is currently in a news-driven environment where the prices of cryptocurrencies have been determined by news agenda rather than fundamentals.

Bitfinex analysts have warned crypto investors to be cautious as bitcoin’s (BTC) recovery over the weekend is not a sign that its correction is over; the asset could witness more bloodshed in the near term.

In the latest Bitfinex Alpha report, experts deemed the market’s reaction this week critical, especially as supply alleviated over the weekend could return when traditional markets open.

“No Man’s Land”

Since Saturday, bitcoin has risen almost 10% from $57,600 to $63,000, closing last week in the green. The asset has surged above the 125-day range low of $60,200, which it broke through earlier this month after news of the German government’s massive BTC selling hit the market.

Market sentiment began to improve after reports that wallets linked to the German government were almost empty. However, the positive sentiment may not be sustained for long as the BTC the German authorities moved to trading desks and exchanges are yet to be sold.

While the supply from Germany appears to have been factored into bitcoin’s market price, Bitfinex analysts believe the end of selling pressure depends on how the involved trading desks execute their trades in the coming days.

Although the shift in sentiment underscores the market’s capacity to integrate new information and adjust expectations quickly, analysts think the market’s reaction over the first two trading days of the week cannot be overlooked for two reasons.

First, the low support level in the $60,200 range has now become a potential resistance line. Second, trading patterns over the past three months suggest that weekends are usually favorable for markets, especially on Saturdays when supply pressure seems to subside.

“We are now in no man’s land until we get clear resolution above or below this level,” the analysts said.

A News-Driven Environment

Besides the potential resistance level and three-month weekend trading pattern, the market is currently in a news-driven environment, where the prices of cryptocurrencies have been determined by news agendas rather than fundamentals.

Since selling pressure concerns are not yet completely obsolete due to upcoming Mt Gox creditor distributions, Bitfinex analysts expect such headlines to continue to have some impact on price movements. As such, the analysts urged investors to exercise caution in their trading strategies.

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Crypto

Bitcoin ETFs Saw $300M in Daily Net Inflows

Published

5 months ago

July 16, 2024

BlackRock’s IBIT led with $117.25 million in inflows on July 15, also being the most traded Bitcoin ETF.

The US spot Bitcoin ETFs recorded a daily net inflow of $301 million on July 15th. This extended their winning streak to seven consecutive days amidst a broader market recovery.

None of the ETFs recorded outflows for the day.

Bitcoin ETFs Rake in $16.11B in Net Inflows Since Jan

According to the data compiled by SoSoValue, BlackRock’s IBIT, the top spot Bitcoin ETF by net asset value, recorded the largest net inflows of the day at $117.25 million. IBIT was also the most actively traded Bitcoin ETF on Monday, with a volume of $1.24 billion. Ark Invest and 21Shares’ ARKB came in close behind with net inflows of $117.19 million.

Fidelity’s FBTC experienced net inflows of $36.15 million on Monday, while Bitwise’s BITB saw $15.24 million in inflows. VanEck’s HODL, Invesco and Galaxy Digital’s BTCO, and Franklin Templeton’s EZBC funds also recorded net inflows. Meanwhile, Grayscale’s GBTC and other ETFs, such as Valkyrie’s BRRR, WisdomTree’s BTCW, and Hashdex’s DEFI, registered no flows for the day.

A total of $2.26 billion was traded on Monday. The trading volume for these ETFs was less than in March when it exceeded $8 billion on some days. Meanwhile, these funds have collectively attracted $16.11 billion in net inflow since their January launch.

What’s Next For Bitcoin?

Earlier this month, bitcoin’s price decline was mainly due to fears of massive selling pressure from Mt. Gox and the German government’s BTC sales.

But the assassination attempt on pro-crypto former US President and presumptive Republican candidate Donald Trump at Saturday’s rally seemed to spark a recovery in the world’s largest digital asset, and experts are bullish on the asset’s price trajectory going forward. Bitcoin surged more than 9% over the past week and was currently trading slightly below $64,000.

Veteran trader Peter Brandt discussed bitcoin’s price outlook, suggesting a potential major rally. He referred to a pattern he terms “Hump->Slump->Bump->Dump->Pump” and highlighted that the July 5 double top attempt was a bear trap, confirmed by the July 13 close. He sees a likely continued upward trend but warned that a close below $56,000 would negate this bullish view.

“Bitcoin $BTC could be unfolding its often-repeated Hump…Slump…Bump…Dump…Pump chart construction. Jul 5 attempt at the double top was a bear trap, confirmed by Jul 13 close. Most likely scenario now is that bears are trapped. Close below $56k negates this interpretation”

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Crypto

LI.FI DeFi Platform Exploited, Over $8M Lost

Published

5 months ago

July 16, 2024

PeckShield alert reveals LI.FI’s protocol vulnerability is similar to a March 2022 attack, with the same bug recurring.

The decentralized finance (DeFi) platform LI.FI protocol has suffered an exploit amounting to over $8 million.

Cyvers Alerts reported detecting suspicious transactions within the LI.FI cross-chain transaction aggregator.

LI.FI Issues Warning After $8 Million Exploit

LI.FI confirmed the breach in a statement on July 16 via X: “Please do not interact with any http://LI.FI powered applications for now! We’re investigating a potential exploit.” The team clarified that users who did not set infinite approval are not at risk, emphasizing that only those who manually set infinite approvals seem to be affected.

According to Cyvers Alerts, more than $8 million in user funds have been stolen, with the majority being stablecoins. According to on-chain data, the hacker’s wallet holds 1,715 Ether (ETH) valued at $5.8 million and USDC, USDT, and DAI stablecoins.

Cyvers Alerts advised users to revoke relevant authorizations immediately, noting that the attacker is actively converting USDC and USDT into ETH.

Crypto security firm Decurity provided insights into the exploit, stating that it involves the LI.FI bridge. “The root cause is a possibility of an arbitrary call with user-controlled data via depositToGasZipERC20() in GasZipFacet, which was deployed 5 days ago,” Decurity explained on X.

“In general, the risks behind routers, cross-chain swaps, etc. are about token approvals. Raw native assets like (unwrapped) ETH are safe from these kinds of hacks b/c they don’t have approvals as an option. Most users & wallets also no longer do “infinite approvals” which gives a smart contract total control on removing any amount of their tokens. It’s important to understand which tokens you’re approving to which contracts.

This dashboard looks for all transactions of a user that intersects Lifi. Not all of these transactions indicate risk- but you can see how, broadly, integrations & layers of tech (like how Metamask bridge uses Lifi on BSC) can complicate how users do or don’t put their assets at risk. Revoke Cash is the most well known approval manager app.

But it’s also good security practice to simply rotate your address. New addresses start with 0 approvals, so starting fresh by moving your tokens to a fresh address is another good security practice.” – commented Carlos Mercado, Data Scientist at Flipside Crypto.

Recent Exploit Mirrors March 2022 Attack

Further analysis by PeckShield alert revealed that the vulnerability is similar to a previous attack on LI.FI’s protocol that occurred on March 20, 2022. That incident saw a bad actor exploit LI.FI’s smart contract, specifically the swapping feature, before bridging.

The attacker manipulated the system to call token contracts directly within their contract’s context, making users who had given infinite approval vulnerable. This exploit resulted in the theft of approximately 205 ETH from 29 wallets, affecting tokens such as USDC, MATIC, RPL, GNO, USDT, MVI, AUDIO, AAVE, JRT, and DAI.

“The bug is basically the same. Are we learning anything from the past lesson(s)?” PeckShield Alert said in a July 16 X post.

Following the 2022 incident, LI.FI disabled all swap methods in its smart contract and worked on developing a fix to prevent future vulnerabilities. However, the recurrence of a similar exploit raises concerns about the platform’s security measures and whether adequate steps were taken to address the vulnerabilities identified in the previous breach.

LI.FI is a liquidity aggregation protocol that allows users to trade across various blockchains, venues, and bridges.

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