'To the moon': Crypto crash leaves Irish earners unfazed as many continue to invest

While its volatility and lack of regulation have been widely criticised by central bankers, young people are yet to be dissuaded from investing

“Young people are bearing the brunt of the cost of living crisis, we’re left with less and less disposable income and whatever cash we have remaining rots in a saving account.”

2022 was not a good year for crypto. Leading currencies including Bitcoin and Ethereum crashed following the collapse of the FTX exchange and global interest rate hikes amid soaring inflation, disproving the notion that these assets were immune to cyclical trends.

What started off as an alternative to traditional payment systems, Bitcoin has since evolved into one of the world’s most established digital assets, with its price soaring exponentially from a humble €13 in 2013 to over €50,000 in 2021.

Its prevalence even led to repeated warnings from the Central Bank of Ireland and other institutions, cautioning that “highly risky and speculative” assets “may not be suitable for retail customers”.

Despite these warnings, crypto’s rising popularity nationally led to the founding of dedicated Irish exchanges such as Bitcove, with other global providers including Bitpanda and Revolut also joining the Irish market to satisfy the demand to acquire the assets.

However, the recent macroeconomic conditions forced the global market into a sharp decline. According to market data provider Cryptocompare CEO Charles Haytor, global January volumes this year were 50.7% lower than in 2022. “European retail has closely followed this trend, with euro and pound sterling trading volumes in crypto falling 67.8% and 66.9% respectively,” Mr Hayter told the Irish Examiner.

However, the Cryptocompare CEO said he is much more optimistic this year as markets rebound, but noted that Europe is “lagging behind American and Asian markets” with US volumes in January 2023 10 times higher than European volumes.

More locally, James Nagle, a UCC graduate and co-founder of Bitcove, an exchange that mostly serves an Irish customer base, said they have seen trade volumes in 2023 rise by 25% compared to the second half of 2022 following the market crash. “Irish investors as a whole have been open to virtual assets,” Mr Nagle told the Irish Examiner.

One such investor is 23-year-old university graduate, Aidan O’Sullivan, who saw crypto’s rise as one of the only opportunities left to earn a return on his savings. When asked why he got involved, “Money,” the now trainee HR manager explains. “All the time, it comes down to money. Obviously, there is more to it, and I do believe that crypto is the future, but essentially, that’s what it boils down to.”

Aidan says crypto is one of the few ways left to make additional income as a young person, telling the Irish Examiner, “with the way things are at the moment, there is very little opportunity to make extra cash”.

“Inflation has made saving redundant and young people have been priced out of most other asset types. Normal stocks are far more expensive to trade and slower to produce results.

“Crypto is fast, and young people are in a position to make riskier investments than those with additional responsibilities. I wouldn’t make these decisions if I had a family, car loans, and a mortgage, but I’m not in that position yet.”

James Nagle of Bitcove agrees, saying that traditional investment streams have become unaffordable for younger cohorts, pushing them to explore alternative avenues.

“With the housing market becoming inaccessible for a large proportion of Ireland’s younger population, this demographic are looking to alternative asset classes in which to invest, protect their earnings and grow their overall wealth.”

Mr Nagle also notes that the digital literacy of Ireland’s youth “lends itself well to the exploration of virtual assets” saying, “it is reasonable to expect that these individuals will be curious about the first digital native form of value”.

In January 2021, Aidan invested €2,000 of his own money into cryptocurrency, Cardano. Before long, Cardano’s price more than doubled, with the value of Aidan’s investment increasing to over €4,000.

Aidan refused to cash out. Two years later, in February 2023, what was €4,000 now stands at just under €500, with little to suggest that Cardano will recover to its pre-crash levels any time soon, but Aidan isn’t going anywhere.

The volatility of crypto and its lack of regulation has been heavily criticised, with the governor of the Central Bank of Ireland, Gabriel Makhlouf recently calling it a “Ponzi scheme” telling the Oireachtas that unbacked crypto like Bitcoin “has no social value whatsoever”.

“People that put their money into unbacked crypto are essentially gambling. When you gamble, you can win. But most of the time, when you gamble, you lose.”

Mr Makhlouf also made specific reference to the large proportion of young adults who have put their money into crypto, which he warned was fueled by an “uncomfortable level of advertising targeted at a younger cohort.”

Yet, despite its volatility, the official warnings against it and the general sense of scepticism since the crash, young people remain loyal investors. Why?

After investing €2,500 in a crypto portfolio including Bitcoin, Ethereum and smaller currencies in early 2022, 25-year-old business development manager, Eabha explained her decision to invest as a “no alternative scenario”.

“My savings account is losing value as we speak. There is no incentive for me to hold my money in a bank, at least with crypto there is a possibility I can actually gain something.”

Like Aidan, Eabha’s portfolio value dropped following the crash, with it now worth just a fraction of her initial investment. Despite this, Eabha is holding on, telling the Irish Examiner that she is in it for the long game.

“Rule one of crypto is to never invest more than you’re willing to lose. This is money for the future, I don’t need it right now.

“Young people are bearing the brunt of the cost of living crisis, we’re left with less and less disposable income and whatever cash we have remaining rots in a saving account.”

While both investors agree that their motivations were largely money-driven, neither was dissuaded after suffering huge losses.

Asked why: “Greed,” Aidan answers bluntly. “The second you sell, you’ve lost it. If I hold, there’s always a chance I can get it back, and more.”

“I would happily let it go to zero if it meant there was also a chance it could rise, but even if it did, there’s no guarantee that I would cash out. If things did improve, I could even invest more.”

“I’m in it for the long game,” says Eabha. “Anyone can see that these are not the best conditions to invest in, but things will pick up again. And when it does, there is always a chance that I could put in more.”

While young investors remain hopeful, nobody can tell what will happen to crypto. Where some see the future of money, others see nothing more than a slot machine. Makhlouf compared it to gambling, but at least betting companies give odds.

Some investors may cut their losses and cash out, but others like Aidan and Eabha remain, embarking in their rocket ship on a one-way journey to the moon.