“wild fluctuations”, have introduced policies

In the past few months, Wendy Li, a 32-year-old independent online content producer in Shenzhen and her boyfriend, Henry Yi, a 29-year-old photographer and video editor, say that they and many of their friends have been riding the wave of cryptocurrency speculation – with all of the ups and downs that come with it.

This surge of interest in cryptocurrencies has been spreading rapidly among China’s millennials and adult members of Generation Z – either through advice from friends or being convinced by online influencers – even as the value of major cryptocurrencies have historically experienced swift rises and falls, including “wild fluctuations” in the recent past.

“Besides us, many of our friends, colleagues and roommates have invested in cryptocurrencies, and the attraction is just so strong that as soon as a friend around you starts doing this, soon several friends in your circle will be tempted,” Li said.

These young Chinese urban dwellers in their twenties and thirties are following the logic of their contemporaries in the United States, South Korea and Japan – that speculating in cryptocurrencies is the last good opportunity to break through class barriers and propel themselves into the upper middle class.

In particular, those living in Shenzhen, China’s tech hub where millions of people work in the fields of technology, finance and the internet, are keen on globalisation concepts and emerging virtual assets. Skyrocketing market values and internet opinion leaders have become driving forces behind their personal dreams.

Because there are more restrictions and suppressions in China on freedom of information, foreign exchange trading and financial investment overseas than elsewhere, young Chinese investors are willing to take more risks compared with their peers in Japan and South Korea, according to economists and independent analysts who follow the digital economy.

There is relatively little information on both the overall size of cryptocurrency investing in China and the characteristics of those doing the investing.

However, in a survey on Chinese microblogging site Weibo earlier this month, asking whether individuals had invested in cryptocurrencies, 44.8 per cent of the 29,000 respondents said they had.

On Weibo alone, a search for “bitcoin” returns hundreds of thousands of posts, which have been viewed more than 11.7 billion times. There are numerous posts on other Chinese social media, as well.

Although Chinese authorities have introduced policies in the last several weeks to restrict domestic investments in cryptocurrencies, a large number of young people continue to share their trading enthusiasm on social media every day, with many bragging about their trading records and claiming that they have been able to purchase assets worth up to 75 times the value of the money they put up.

“Chinese young people are accustomed to using mobile phones to buy stocks and other securities, and to apply for online loans, so it is very easy for young people who have bought investments via the internet to have a go at cryptocurrencies,” said Simon Zhao, associate dean of BNU-HKBU United International College (UIC)’s Division of Humanities and Social Sciences.

A report by big data consultancy MobTech showed that more than 80 million Chinese investors used mobile apps to make investments last year. The data showed that the number of new individuals making investment-related purchases via mobile apps exceeded 20 million, with 52.9 per cent of them being under 30 years old.

Young Chinese are more interested in speculation than those in their forties and fifties, and have less interest in long-term investments, Zhao said.

I worked in media. In a way, cryptocurrencies are very similar to self-publishing

Wendy Li, online content producer 

The high-risk, high-return speculation market has always been popular with a large number of young Chinese, he added.

Li and Yi, in Shenzhen, are among those keen on keeping up with the trend. Li said her monthly income was about 10,000 yuan and she lives in a three-bedroom flat with three roommates who are also speculating in cryptocurrencies.

“In April, I met a girl around my age in Shenzhen. She works for a fintech start-up and had already earned millions of dollars by speculating in cryptocurrencies last year. I was particularly struck by the concept of decentralisation [underlying many cryptocurrencies] that she mentioned – that is, we young people could break the current economic entrenchment and power in determining wealth, and that the use of the currency should not be in the hands of only a few, such as Wall Street and the government,” said Li, who said she has purchased stocks, funds and peer-to-peer products via mobile apps.

“I worked in media. In a way, cryptocurrencies are very similar to self-publishing,” she added. “Before, individuals had no way of having their voices heard, but self-publishing is kind of decentralised, allowing an individual to have a different voice from the traditional media controlled by [corporate] giants and authorities.”

In April, Li and Yi invested 80,000 yuan (US$12,500) together via ZB.com, one of the few cryptocurrency exchanges available in China without using a virtual private network (VPN).

They purchased tether (USDT) at a price between 6.47 and 6.81 yuan from other buyers through the app, and then bought uni, dot, ethereum and litecoin cryptocurrencies. After a couple of weeks, their wealth on the books rose to 100,000 yuan, but when the market plummeted in early May, they invested an additional 30,000 yuan.

Their overall investment was recently halved, prompting their attitudes on cryptocurrencies to diverge.

Li said she felt that the risks were becoming greater and greater. “For example, many governments have introduced policies to crack down on cryptocurrency trading and mining,” she said.

But Yi wanted to roll the dice and invest more after prices fell, believing the market would skyrocket again, just as it has before.

“This [cryptocurrency] is the only opportunity that young working-class people like us have to get rich quickly, although the risks are also very high,” Yi said.

Most young people in China don’t pay much attention to the correlations between cryptocurrencies and the price of gold, the US dollar, global inflation expectations, and so on

Guo Zhongxiao, digital economy pundit

“If we don’t seize it, then we will never have the money to buy an apartment in Shenzhen in our lifetime,” he said, adding that, for this reason, it is quite common to see young people in the city borrow money to speculate in cryptocurrencies. “Usually, you only need to press a button on the phone to increase your leverage to three times, five times or more. If it goes up, the platform pays N times the gain, but the loss is also multiplied by N times the loss.”

Many young Chinese investors do not have a good understanding of various professional indicators, nor the operating logic behind the cryptocurrency market. Their reactions to market shifts are also delayed, due to Beijing’s restrictions on internet information and overseas investments.

“Most young people in China don’t pay much attention to the correlations between cryptocurrencies and the price of gold, the US dollar, global inflation expectations, and so on,” said Guo Zhongxiao, an independent commentator on the digital economy in Shenzhen. “Few of them are big fans of technological forecasting and futurism, but they’ve gone crazy over the recent skyrocketing [prices of] bitcoin and dogecoin. They won’t hold them as long-term investments.”

Speculating in cryptocurrencies is much riskier in China because trading is deemed illegal by the government, and individual investors lack of enough information to understand the market and properly assess risks, said Frank Cui, chief scientist with Beijing-based dataqin.com, a blockchain and big data consultancy.

“Official media will only run news about crackdowns and restrictions on market trading and foreign exchange,” Cui said. “In China, cryptocurrencies are more like 24-hour gambling with no price fluctuation limits, but also no legal protections.”

Both Cui and Zhao expect fiat money and cryptocurrencies to play against each other in the long-term, accompanied by more market shocks, as a growing number of Chinese millennials and Generation Z speculators try to grab a share of the pie, despite authorities’ controls on information and trading.

After saying she bought about 280,000 yuan (US$44,800) worth of bitcoin, ethereum, dogecoin and shiba inu (shib) coins since February and doubled the return on that investment, one internet user transformed herself from an e-commerce business manager to a financial blogger, attracting more than 70,000 followers on Weibo.

She has become a popular online influencer on cryptocurrencies by sharing various comments from Elon Musk, Lawrence Summers and other prominent figures outside China’s “Great Firewall”.

“I’m fine if my Weibo account is blocked; it doesn’t scare me. I still have 90 million shib coins. What if, at some point, [shib’s price] goes up to US$0.10 a piece? It’s still worth gambling on it,” she said in one of her posts.

Shib coins were valued at US$0.000007138 each as of Wednesday.

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