[Digital Today reporter Yoonseo Lee] U.S. Gen Z is jumping into investments in bitcoin and other cryptocurrencies, undeterred by high volatility. More than 64 percent of respondents showed a willingness to take risks. About two thirds said they plan to invest in cryptocurrency this year.

Cointelegraph, a blockchain media outlet, reported on Tuesday that Gen Z was about 4 times more likely to hold cryptocurrency than to hold a retirement account. By contrast, millennials’ risk-taking response rate stood at 49 percent.

A notable point is that 84 percent of Gen Z sees cryptocurrency as a risky and volatile asset. Even as they know prices move in real time and trading continues 24 hours a day, which can affect execution prices, market participation appears to be increasing each year.

One in 4 U.S. Gen Z respondents said they get financial advice on TikTok. About 70 percent said they feel “financial FOMO” while using social media, and half of investors said they have invested based on such feelings. An opinion was also presented that it is not surprising Gen Z makes significant investments in cryptocurrency because social media is crowded with so-called “financial influencers” who provide crypto information.

At the same time, some point out that the expansion of Gen Z’s cryptocurrency investment does not necessarily translate into investing based on sufficient understanding. Many tended to invest without fully weighing the risks. They also appeared to accept advice encountered on social media without much verification or to make investment decisions without consulting financial experts.

Gen Z generally showed strong confidence in its own investment judgment. More than 70 percent of respondents said they were confident about their investing behavior, but an analysis suggests that such confidence, especially in cryptocurrency investing, may not reflect actual ability. It was also noted that younger generations may be relatively vulnerable to the so-called Dunning-Kruger effect, overestimating their knowledge and underestimating risk.

Beyond volatility, a lack of market transparency is also cited as a risk factor that is hard to ignore. Unlike listed companies, digital assets have no disclosure obligations, which can mean relatively lower access to information and transparency. Even so, Gen Z investors tended to trust cryptocurrency unconditionally, and some say regulation could become more important in terms of investor protection and boosting market trust.

Diversification benefits are also not automatically secured simply by allocating part of a portfolio to cryptocurrency. In periods of system stress, cryptocurrency can move similarly to high-growth stocks, weakening diversification effects, and cases were cited in which bitcoin showed correlation with gold, a traditional safe-haven asset.

Still, these risk factors do not automatically negate cryptocurrency’s role in a portfolio. Instead, some suggest cryptocurrency could potentially establish itself as a new diversification tool over the long term. For that change to materialise, investor protection measures, information transparency and institutional trust would need to be supported together.