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Gen Z’s sense of ‘nihilism’ drives a $100 trillion surge in cryptocurrency derivatives amid perceptions of a flawed system.
A notable rise in housing expenses renders home ownership inaccessible for numerous Gen Z individuals, resulting in financial nihilism, stated CoinFund’s David Pakman.
Coinfund Managing Partner David Pakman (Daniel Murray/Consensus modified by CoinDesk)
What to know:
- Gen Z’s inclination towards high-risk investments is a logical reaction to the scarcity of conventional wealth-building avenues, such as affordable housing, according to CoinFund’s Pakman.
- The drastic rise in housing prices compared to earlier generations makes home ownership infeasible for many Gen Z individuals, resulting in financial nihilism.
- Faced with limited traditional options, Gen Z is increasingly engaging in perpetual contracts, memecoins, and other high-risk investments to accumulate wealth.
The escalation in speculation fueling prediction markets and leveraged bets across various sectors is not imprudent; it is a reasoned approach, as per CoinFund managing partner David Pakman.
During a presentation at Consensus Hong Kong, Pakman redefined this behavior as “economic nihilism,” a strategic response by Gen Z to systemic obstacles in wealth accumulation.
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His argument commenced with housing. For Gen X and Boomers, he noted, the median home cost was approximately 4.5 times their annual salary. In contrast, for Gen Z, it has risen to around 7.5 times.
This transformation, Pakman contended, effectively excludes younger individuals from the housing market, historically regarded as the foundation of middle-class wealth. Only 13% of 25-year-olds possess their homes, whereas over half of Gen Z investors currently hold crypto, he stated.
With limited conventional options available, Pakman remarked that younger generations are gravitating towards high-risk wagers, including memecoins, perpetual futures, zero-days-to-expiration options, and prediction markets, not due to ignorance but as a deliberate strategy.
“It’s becoming actually rational to think that if the typical ways that long-term wealth creation is closed off to you, a small chance at a large return beats near certainty of slow decline,” he explained.
He highlighted crypto perpetual contracts, which are futures contracts without expiration, that recorded $100 trillion in notional volume last year, based on the data he presented.
Prediction markets also surged, expanding from $100 million to $44 billion in just three years. While some analysts utilize them for political predictions, Pakman observed that 80% of the activity pertains to sports betting. Dune data illustrates a similar trend, with $1.8 billion out of $2 billion in daily prediction-market volumes focused on sports at the start of the month.
Pakman called on developers to respond with improved tools.
“It’s up to us in crypto to build products that allow the expression of risk in more transparent ways, that are fairer, have lower fees, and can disclose risk and payout capabilities more transparently,” he asserted.
