Students Use Loans to Fund Cryptocurrency Investment: Study

On March 22, 2018, a report was released by the Student Loan Study that raised a few eyebrows across the space. A survey of 1,000 college students with student debt were asked the simple question:

Have you ever used student loan money to invest in cryptocurrencies like bitcoin?

The results were astounding with 21.2 percent answering in the affirmative.  

Although the details of the methodology used in the survey have been kept relatively vague and leave questions as to whether the subset selected could provide a realistic estimation, a case can be madefor these surprising results. 

But is it possible that a whole fifth of this group — more than 9 million people, have invested student loans into crypto? It’s possible, but not probable — we’re simply going to need more data before we can even consider this number as a reliable estimate.

With that being said, a closer examination of the demographic in question may shed some new light on the initial analysis: These students are most likely to be millennials. The average age of students in college is about 24 years old, and 60 percent of them are borrowing money to support their studies. 

The last four months have seen the cryptocurrency space transformed. What was once a niche investment tool has emerged into a legitimate financial platform that has quickly gained widespread public exposure. Few millennials made money in the December bubble, but most knew someone who did, and word spreads fast among the college ranks.

Traditional Investment Declining

Recent trends have shown that millennials are shying away from the more traditional avenues of investment. In 2016, Bankrate reported a survey which stipulated that just 31 percent of millennials have invested in the stock market, compared with 51 percent of Generation Xers (ages 38-53) and 48 percent of the Baby Boomers (ages 54-75).

The tremors of the 2008 financial crisis have had a lasting effect upon millennials, entrenching sentiments of suspicion and discontent toward the towering giants of traditional finance. Besides finding the stock market rather dull and uninteresting, many millennials still mistrust its long term stability, seeing it as too great a risk in return for relatively meager short-term rewards. Furthermore, millennials simply lack the capital or the patience for long-term, low-risk investments.

It should not be a surprise then that other, more modern forms of speculation have taken the lead. Earlier this month, Korea Financial Investors Protection Foundation cited findings that 22.7 percent of young people in their 20s admitted to having purchased virtual currency: a number eerily similar to the survey in question. Even before the December bubble, indicators showed that millennial interest in the cryptocurrency market was growing at a rampant pace — a trend only exacerbated by the events of the last few months.

Given this evidence, it’s not a stretch to imagine that a college student with a few hundred dollars left over at the end of the semester might take a chance on a new, hip, easily acquirable investment that has the potential to pay off big in the not-too-distant future. Student loan debt is an uphill battle that most will have to fight well into their 40s. The volatility of the crypto market is exciting, and, for better or worse, its potential has attracted the attention of a generation that sees it, not only as “their currency” and the key to the new financial world, but also as an opportunity that could provide the means of foregoing decades of debt.

This survey and others alike are not science, but they are early indicators that a shift in the financial landscape is taking place. Though they do not comprise the bulk of the market cap, millennials do comprise the largest portion of total cryptocurrency investors. Reservations against traditional financial institutions coupled with growing enthusiasm over the promise of a decentralized world almost ensure that this number will continue to grow.