It’s an interesting question. Back at the beginning, when Bitcoin emerged,for some the interest in crypto was partly a way of flipping the bird at the big banks and governments that had let the 2008 financial crash to happen, while for others the technology drew them in. But where are we at now in terms of sentiment?
A Coindesk opinion piece by Raphael Auer and David Tercero-Lucas starts by suggesting that at a time when cryptocurrencies’ market capitalizations are returning to all-time highs, it’s a good time to examine investor views, characteristics and sophistication. They ask, “Are cryptocurrencies sought out of distrust in fiat currencies or regulated finance? And who invests in cryptocurrencies?”
According to data from the “Survey of Consumer Payment Choice” (SCPC), a dataset that is representative for the U.S. population and spans the period from 2014 to 2019, the Coindesk authors say “there is no evidence to support the hypothesis that cryptocurrencies are sought as an alternative to fiat currencies or regulated finance in the U.S.” Nor do cryptocurrency investors have heightened concerns about the security of mainstream payment options, such as cash or commercial banking services.
Education level is a pointer to crypto ownership
What the research does show is that cryptocurrency is a niche market dominated by young, male, educated investors: “In fact, one of the main socioeconomic determinants of U.S. cryptocurrency investors is educational attainment.” Also, if you’re young, you’re more likely to own at least one cryptocurrency.
The pandemic effect
The pandemic appears to have been a factor in demand for crypto, and might the “recent crypto hype might have changed the composition of investors,” they ask. The “Survey of Consumer Payment Choice” for the year 2020 indicates that the pool of investors was much wider in 2020 than in 2019, and that almost 4% of U.S. citizens own at least one cryptocurrency in comparison with the 1.9% of the previous year. There is also an upward trend in the number of people who know about cryptocurrencies (more than 72% in 2020). Furthermore, the survey shows that crypto owners are less of a ‘niche group’ now, and are a better reflection of the general population. For example, more of the less educated people adopted crypto in 2020 than in 2019. The average age of cryptocurrency investors has also increased, with more of what might be considered “standard” investors becoming interested in this asset class.
Taking all this into account, it would seem that crypto ownership is not related to any growing distrust in today’s regulated financial markets. Nor are they bought as an alternative to fiat currencies or regulated finance. The main drive to buy appears to be their value as a speculation asset. “From a policy perspective, if the objectives of investors are the same as those for other asset classes, so should be the regulation,” the authors say, pointing out that as crypto goes more mainstream and investors better reflect the general population, then “a clarifying regulatory and supervisory framework for cryptocurrency markets may be beneficial for the industry in a context where cryptocurrencies are being targeted by less-educated investors and adoption is becoming widespread.”
Mehran Muslimi 