This thesis explores how macroeconomic factors such as inflation and interest rate hikes influence Generation Z’s investment behavior in cryptocurrencies versus traditional stock markets. By combining economic theory with behavioral finance, the study integrates frameworks such as the Life-Cycle Hypothesis, Modern Portfolio Theory, and Prospect Theory. A mixed-methods approach is applied, using quantitative time series data (2014-2024) from Bitcoin, Ethereum, Nasdaq Composite Index, and macroeconomic indicators like inflation and interest rates, this is complemented by a survey targeting Gen Z investors.

The regression results show that both inflation and interest rates have contrasting effects on Gen Z’s investments. While these macroeconomic factors correlate with decreased allocations to traditional stocks, they are associated with increased investments in cryptocurrencies. This suggests that Gen Z treats crypto as both a speculative asset and an inflation hedge, despite greater trust in traditional stocks. Survey findings reveal that while Gen Z remains open to alternative assets like crypto they still prioritize stability and regulation during periods of economic uncertainty.

The study challenges the assumption that younger investors are naturally risk-seeking and highlights the importance of combining rational models with behavioral insights when analyzing Gen Z’s investment decisions.