The Youngest Users, The Most Old-Fashioned Positions

Author: Andjela Radmilac, cryptoslate

Compiled by: Saoirse, Foresight News

Like fashion, the investment market often revives old trends that have long been buried. The cryptocurrency cycle that millennials experienced has given rise to yield-generating Dogecoin and various novelty financial products themed around food. Now, as Generation Z enters the market, dressed in wide-leg jeans and carrying retro digital cameras, they show a strong interest in traditional investments, reminiscent of their parents.

Wide-leg low-rise jeans are back in style, and their risk tolerance in investment portfolios has also decreased.

A report from Binance Research on August 12 examined how different generational users utilize direct stocks, tokenized bStocks, and traditional financial perpetual contracts on exchanges. The youngest users do not frequently employ leverage or engage in high-frequency trading. Among these three product categories, Generation Z has the lowest turnover rate in the working-age population. This conclusion is based on short-term data from Binance users; their direct stock products will not achieve large-scale implementation until June 2026.

The most traditional, conservative, and least speculative investment portfolios in the cryptocurrency space are likely held by Generation Z.

(Note: The generational divisions in the text are based on birth years:

• Generation Z: 1997–2012
• Millennials (Generation Y): 1981–1996
• Generation X: 1965–1980
• Baby Boomers: 1946–1964)

A Rebellion with Fees

ETFs best illustrate this generational difference.

At the beginning of August, ETFs accounted for 25% of Generation Z's direct stock trading volume, up from 14.6% in June. In contrast, the millennial figure was only 9.5%, indicating that young people’s stock trading in funds is more than double that of millennials.

Compared to trading volume, the funding structure flowing into these funds is more noteworthy. In June, non-leveraged ETFs accounted for 18.5% of net inflows into stocks for Generation Z, rising to 21.9% in July; meanwhile, the proportion of funds flowing into individual stocks decreased from 77% to 74.2%.

In July, Generation Z's overall stock investment shrank, with net investment dropping by 17.4%, but the inflow of non-leveraged ETFs remained almost stable, declining by only 2%. The inflow of funds into individual stocks fell by 20.4%, and inflows into leveraged products plummeted by 28.5%.

Data from Binance shows that Generation Z was also the only group in July to see an increase in the number of ETF holders, rising by 2.9%; meanwhile, the number of millennial ETF holders decreased by 4.5%, and Generation X saw a decline of 5.9%.

Thus, it is not simply that young traders are buying a bit of the S&P 500 ETF in between their speculative trades. When Generation Z reduces overall investment, ETFs are the sector where they continue to allocate funds.

Their individual stock holdings, while not entirely resembling the portfolios constructed by regional pension funds, are certainly not the lottery-style speculation that is commonly perceived.

In accounts of Generation Z that only buy and never sell, the average single investment in direct stocks is highest for the Charles Schwab U.S. Dividend ETF (SCHD) at $16,567, followed by Broadcom at $12,370. Overall holdings are clearly skewed towards the semiconductor and AI sectors; however, popular speculative stocks among retail investors like Tesla and Nvidia have much lower average buy amounts in bStocks, at only $633 and $514, respectively.

In other words, Generation Z remains optimistic about the technology and artificial intelligence sectors, but large amounts of capital are not directed towards those popular stocks with fervent fan bases.

Holding data also confirms this point. Approximately 22% of Generation Z's direct stock accounts have never placed a sell order, compared to 19% for Generation X and only 9% for Baby Boomers. Millennials lead with a 30% share in the "never sold" category, breaking the stereotype of them being reckless with their finances.

If the definition is broadened from "never sold" to "buying more than selling," Generation Z jumps to the top.

About 76% of Generation Z's bStocks accounts are net accumulation accounts, the highest among all generations, 9 percentage points higher than millennials. In the direct stock sector, 77% of Generation Z accounts are continuously accumulating; in comparison, Generation X is at 74%, and Baby Boomers at 68%.

They are not just trading less. In Binance's sectors that favor asset holding over short-term derivatives trading, they are mostly increasing their holdings.

Perpetual Contracts for Trading, ETFs for Long-Term Holding

When focusing on perpetual contracts, the phenomenon becomes even more interesting. Logically, this generation, which grew up alongside cryptocurrencies, should be adept at using such products. They do use perpetual contracts, but their aggressiveness is less than that of older users.

Generation Z accounts average 13 traditional financial perpetual contract trades per month, compared to 17 for millennials, 16.5 for Generation X, and 19 for Baby Boomers. Only 14% of Generation Z's perpetual contract accounts are classified as high-frequency trading, lower than the 18% for millennials and Generation X, and even below the 16% for Baby Boomers.

This creates a somewhat contrasting situation: a 22-year-old young person trading stocks through a cryptocurrency exchange has fewer perpetual contract trades than their Baby Boomer parents.

The usage of leverage and inverse ETFs follows the same pattern. 88.2% of Generation Z's traditional financial perpetual contract accounts do not trade leverage or inverse ETFs, compared to 84.5% for millennials and 85.9% for Generation X. In the bStocks sector, 98.9% of Generation Z accounts avoid such products, higher than other working-age groups.

Baby Boomers still lead in avoiding leverage and inverse products. Overall, they have the highest proportion of accounts avoiding these products; in the direct stock sector, 98.9% of Baby Boomer users avoid such products, while the figure for Generation Z is 96.5%.

Thus, Generation Z has not completely become Baby Boomers. However, among those who have not yet retired, their investment behaviors are surprisingly similar.

The chart shows the lower proportion of leverage and inverse product usage among Generation Z (Source: Binance Research)

Another noteworthy point is what they trade and where they truly allocate their funds, which shows a clear distinction.

In July, leverage and inverse ETFs accounted for 9.25% of Generation Z's direct stock turnover but only 3.93% of net fund inflows. By early August, this net inflow proportion further dropped to 2.65%.

This indicates that leverage tools are being used for their intended purpose: short-term positions, rather than as a place to store long-term principal.

Traditional financial perpetual contracts follow the same logic. About 60% of Generation Z accounts are net buyers, the highest proportion among all age groups, but net capital flow is less than 1% of total transaction volume. Traders continuously open and close positions, almost never leaving long-term funds inside.

Stock assets are entirely different. Generation Z's direct stock net flow ratio is 26.5%, with an average net inflow of $1,898 per account.

This difference explains why simply looking at whether young people use perpetual contracts can obscure the truth. They do engage in it, but their long-term funds are placed elsewhere.

Binance's previous research on new-generation investors provides a reasonable explanation. Generation Z accounts for about 44% of Binance's direct stock and bStocks users, and 45% of traditional financial perpetual contract users; they are the largest user group in the direct stock and bStocks sectors, with the scale of traditional financial perpetual contracts being roughly equal to that of millennials. Over 90% of traditional financial product users across all generations come from emerging markets, where purchasing U.S. stocks through local traditional brokers is quite challenging.

For some of these users, this cryptocurrency exchange is, in fact, the most convenient brokerage they can access.

They are familiar with the platform interface, their account funds are ready, they can purchase fractional shares, and they can trade outside of regular U.S. trading hours. Binance data shows that 13% of all direct stock users are Generation Z clients from emerging markets, with their stock assets totaling less than $2,000.

This makes their behavior easy to understand. The exchange does not need to train every young user to become a perpetual contract trader; it can also serve as a channel for users to purchase conventional investment products.

Former Funds Falling into Investment Traps

This contrast is quite interesting because many financial products born in the early cycles of cryptocurrency can be deemed crazy by traditional standards.

Pickle Finance launched Jar and Farm products that can stack yields from other protocols, allowing users to earn rewards simply by depositing tokens. This mechanism makes sense in financial logic, but the naming sounds like a retirement product designed by a supermarket with a wild imagination.

ShibaSwap similarly uses "Bury" to indicate staking tokens, with the interface featuring token names like SHIB, LEASH, and BONE. The cryptocurrency industry has paired financial operations that are already confusing for newcomers with quirky and playful names.

These types of products over the past decade have led to a fixed judgment: young people growing up in the Dogecoin era would be more adaptable to such chaotic and high-risk financial gameplay.

However, Binance's data shows the opposite: young users are allocating more and more stock funds to non-leveraged ETFs, with trading frequencies lower than those of millennials and Generation X, and leverage-related investments accounting for only a small portion of net investments.

This does not mean they have abandoned cryptocurrencies. A 2023 survey by the Financial Industry Regulatory Authority Foundation and the CFA Institute found that 55% of U.S. Generation Z investors hold cryptocurrencies, and CryptoSlate has previously reported on the widespread interest of young Americans in crypto assets.

A more interesting inference: using cryptocurrencies and pursuing extreme high-risk investments have never been the same thing.

For those encountering the financial market for the first time through a trading app, Binance may not necessarily be a rebellious alternative to traditional brokers. It is simply a financial interface they are already familiar with. Once the platform launches stocks and ETFs, their investment preferences do not need to replicate the speculative style of the early days of cryptocurrency.

This is precisely the difference between Generation Z and millennials or Baby Boomers.

They have not built classic retirement investment portfolios. Allocating semiconductor stocks, AI stocks, tokenized stocks, and participating in a 24/7 market are not recreating the wealth management schemes of the 1990s. However, when they operate these products, they do so with an unexpectedly old-fashioned mindset: buying and holding more than selling, without relying on leverage for every position.

For years, the cryptocurrency industry has continuously packaged finance in novel and bizarre ways to attract young people. Yet this youngest group of users has embraced the platform interface while discarding the quirky and high-risk designs within.

Fashion can bring wide-leg jeans back into style, and the financial market can also revive simple investment ideas: buy assets, hold them long-term, and expect steady appreciation. This market can fully accommodate such choices.