Considering a crypto investment? Why current owners are 'committed' despite recent volatility
- Cryptocurrency markets have plunged and Coinbase's CEO has warned a "crypto winter" may be ahead.
- But crypto users aren't deterred, a Morning Consult survey shows.
- In fact, the share of respondents considering buying more has remained nearly steady all year.
Cryptocurrency enthusiasts have remained resilient even as the cryptocurrency market has crashed and burned this year.
Bitcoin last traded around $20,000, less than a third of its all-time high near $69,000 reached last November, while other digital assets like TerraUSD are near worthless and crypto lenders like Celsius Network come perilously close to bankruptcy.
Despite all of that, the share of people who said they’re still interested in purchasing cryptocurrency remained remarkably close to steady all year. In June, 23% of roughly 4,400 U.S. adults surveyed by Morning Consult said they’re considering buying crypto in the next month. That’s only a smidge below 26% in January. The survey has an unweighted margin of error of up to +/-1 percentage point.
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What’s driving this resiliency?
Even as consumer confidence has plummeted amid soaring inflation and plunging valuations of financial assets, including cryptocurrencies, crypto holders remain relatively upbeat. Consumer confidence among crypto users is 16.4 points higher than the average American, Morning Consult found.
They are particularly optimistic about the future of their personal finances, with 44.4% of cryptocurrency owners In May expecting their personal finances to improve over the next 12 months. Only 27.1% of all U.S. adults and 29.5% of high-income adults forecasted improved finances in that timeframe.
“This more optimistic mindset may help drive this group to invest in riskier assets like cryptocurrencies,” the report said. “It may also be partially a result of their investments in crypto.”
Who owns crypto?
About 1 in 6 households owns crypto, and most owners tend to be younger, white and male, but they are surprisingly diverse too.
Cryptocurrency owners are a more ethnically diverse group than the general population. Nearly a quarter (23%) are Hispanic, compared with 17% of the general population. And overall, 41% of cryptocurrency owners identify as nonwhite.
Forty-two percent of cryptocurrency owners report annual household income below $50,000, and 40% are Gen Xers or older.
Why are crypto users so optimistic?
Part of it is youthful optimism.
Older Americans tend to be more pessimistic. More of them tend to live on fixed incomes, face health risks and have negative memories of high inflation times.
“For the 42% of crypto owners who are millennials, many of these reasons for a negative economic outlook don’t apply,” Morning Consult said.
Others are strong believers in the future of digital money.
“At least a third of owners use it in some way or other as a form of payment,” Charlotte Principato, financial services analyst at Morning Consult and one of the authors of the report, said.
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Why do they own crypto and continue to hold it?
Most respondents (66%) hold it as an asset in their portfolios to make money, but more than a third said they occasionally use it as a form of payment.
Those who are in it to make money aren’t scared off by the recent plunge because they’re in for the long-term much like people who invest for their retirement, Principato said. That also means a good chunk of owners didn’t buy at the highs last fall. Instead, they have been holding Bitcoin for about three years, meaning that even with the recent plunge, they’re still only around breakeven or even up on their investment, she said.
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Even those with less discretionary income are just as committed to staying the course. “What’s encouraging them is the drive to make money and crypto’s low barrier to entry than other markets,” she said. “You can invest with just $1. It’s capturing people with very little for investments.”
Where do these crypto optimists see Bitcoin prices heading?
As of June 15-20, Morning Consult data shows that the average cryptocurrency user expected the price to bounce back to around $38,000 over the next six months. Bitcoin was last hovering around $20,000.
That’s despite a warning last month from Brian Armstrong, chief executive officer at Coinbase, that a recession could bring on a long “crypto winter.”
“There are no signs of these trends reversing, although growth of ownership across the population may stall if inflation gives way to a recession and a ‘crypto winter,’” Morning Consult’s report said.
What does this tell us?
The continued interest in cryptocurrencies means that this asset class – and that is what most consumers see it as – is here to stay.
"When I look at the consistency of ownership and intention to buy, it leads me to see retail investors are more measured long-term users,” Principato said.
Recent volatility seems to stem from institutional investors, not everyday investors, who leveraged their holdings and had to get out because of the recent decline, she said.
“Consumers around the world are committed to crypto, despite its volatility,” the report said. “Leaders can no longer dismiss decentralized digital assets as a passing fad.”
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at email@example.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.