Crypto Seen as More “Fun” Than the Stocks and Bonds of TradFi
A survey by Cardify, a market research company, shows that crypto investments have seen astronomical growth since the beginning of 2020. Retail investments by comparison, however, have failed to match or increase at a substantial rate like their digital counterparts.
A significant reason for this is the increasing number of young investors going into crypto full time. They are buoyed by the high volatility which brings good returns, and the exciting implementations of crypto— Web 3, Non-Fungible Tokens (NFTs), Decentralized Autonomous Organizations (DAO), boardless payments, and more. They consider these as factors that make investing in crypto more fun than putting money in bonds and stocks.
The Pareto Distribution Model
Named after Vilfredo Pareto, an Italian civil engineer and economist, the Pareto model studies economic efficiency and income distribution. Pareto efficiency is “a situation where no individual or preference criterion can be better off without making at least one individual or preference criterion worse off or without any loss thereof.” The Pareto distribution model considers a set of all Pareto efficient scenarios and the trade-offs that are made logically.
Packy McCormick, a popular business and investment analyst, coined the term “Pareto Funtier”, which he applies to crypto. With making money and having fun being the underlying criteria, he defines it as “the set of possibilities in which you can’t have more fun without making less money or have more fun without making more money.”
A trade-off has to be made between fun and money when investing economically. To make more money, investors have to give up a little fun and vice versa. Cryptocurrency and its underlying opportunities like Web 3.0, NFTs and DAOs are bucking that trend.
The opportunities in Web 3.0 have pushed the Pareto Funtier outwards by converting money into fun things and fun into money. The popular play-to-earn model, the possible wear-to-earn model, and other use cases have attracted early adopters. These provide an enjoyable way for users to make money, and as tech continues to grow, more applications will emerge.
Art collecting has a long history, with digital collectibles making the experience accessible to more people. NFTs and DAOs like the Constitution DAO are also pushing the Pareto Funtier out for these investors. They can enjoy the thrills of purchasing an NFT and collecting digital art while benefiting from the possible financial upside.
Several DAOs have spawned following the constitution DAO’s failure to purchase a copy of the US constitution. Some of these include;
- Friends with Benefits (FWB) is a hybrid of a social club and a studio that exists online and in real life.
- Seed Club, a community that helps establish the next wave of thriving communities while sharing in the upside. Similar to Y combinator but in DAO form.
- KrauseHouse, a DAO attempting to buy an NBA team after recently raising 1,000 ETH from its backers.
- OpenAccessDAO, a DAO set up to purchase paywalled academic articles and make them openly available to liberate valuable knowledge.
The recent surge in DAOs hints at a future where people’s passions and financial interests converge.
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Crypto Is Where The Fun Is
The nascent nature of cryptocurrency and the absence of restrictions found in the stocks and bonds markets makes them more exciting for new investors. The low volatility, saturated and competitive nature of traditional finance means crypto presents a fun investment option.
As highlighted already, younger investors are using the opportunities presented by crypto as a way out of working their entire lives. More of the Gen Z and Millennial generations are seeking more fun ways to find meaning in their work. This has led to a greater embrace of digital asset investing among this demographic, with crypto affording them the ability to have fun while earning a living.
As a result, more money has sunk into accounts dedicated to digital assets than traditional finance instruments. Cardify’s head of product, Amber Foucault, pointed out that approximately 25% of investor funds in 2021 have gone to cryptocurrencies. This represents a significant increase from 5% last year.
Do you find crypto more fun than investing in bonds and stocks? Let us know in the comments below.