There is a growing divide between two types of cryptocurrency owners: Those who hold it and those who spend it.
In the first-ever economic well-being survey to include questions about cryptocurrency, the U.S. Federal Reserve found very different profiles of the 12% of U.S. adults who own crypto.
While around 10% of U.S. adults said they bought or held crypto assets such as Bitcoin or Ether as an investment, around 2.5% say they either bought something with it or sent it to family and friends.
The cryptocurrency owners who held on to the coins had a disproportionately higher income and had access to bank accounts, credit cards, and retirement savings. “Those who held cryptocurrency purely for investment purposes were disproportionately high-income, almost always had a traditional banking relationship, and typically had other retirement savings,” the Fed wrote.
Meanwhile, those who spent or transferred their digital coins were disproportionately unbanked and low-income, suggesting that crypto holders use the coins as a high-risk speculative asset while transactional users depend more on its purchasing power to buy things and transfer money.
The two crypto owners
Of the people who held on to crypto as an investment, 46% reported an income over $100,000 while another 29% were earning more than $50,000. Almost every single person investing in crypto had a bank account and 89% were saving for retirement.
Meanwhile, transactional crypto spenders—who made up a far lower percentage of the crypto owning population—were much less well off. Almost 60% of transactional crypto users had an income less than $50,000 and only about 24% had an income exceeding $100,000. These users were also far less likely to have bank accounts. Around 13% of transactional crypto users lacked bank accounts compared to the 6% of adults who lack bank accounts across the U.S. regardless of crypto ownership status.
The report paints a picture of these crypto spenders as living further outside the traditional financial system overall. While 99% of crypto holders have bank accounts, 87% of crypto spenders can say the same. And while around 97% of crypto holders have a credit card, only 73% of crypto spenders do so.
The downturn of the crypto market
The crypto market has not been smooth sailing in recent weeks, with Bitcoin and other cryptocurrencies recently falling to their lowest levels since July 2021.
And while crypto was once positioned as a hedge against inflation, Bitcoin and other cryptocurrencies have increasinglybegun tomove in tandem with equities markets as institutional and professional investors have taken bigger stakes in digital coins.
Bitcoin’s 40-day correlation with the S&P 500 benchmark reached a record 0.82 in May,according to Bloomberg data, as shocks that pushed investors to retreat to safer corners of the market began to hit riskier tech stocks and cryptocurrencies more so than other assets.
The recent downturn of global equity markets dropped the price of Bitcoin below $30,000, though a 11% rally last weekend sent it to $31,700.
Sign up for theFortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.
As an enthusiast and expert in cryptocurrencies and financial markets, I've closely followed developments, trends, and the evolving landscape of digital assets up until my last update in January 2023. I've actively engaged in analyzing market behavior, regulatory shifts, and the socio-economic impact of cryptocurrencies on individuals and institutions.
The article you provided discusses the widening disparity among cryptocurrency holders, outlining two primary categories: investors who primarily hold cryptocurrency as an asset and those who actively use it for transactions.
Here's a breakdown of the concepts and themes covered in the article:
-
Cryptocurrency Ownership Profiles: The article highlights the distinct profiles of two groups within cryptocurrency ownership: investors (approximately 10% of U.S. adults) and transactional users (about 2.5% of U.S. adults).
-
Income Disparity: It delves into the income disparities between these groups. Investors tend to have significantly higher incomes, with 46% reporting an income over $100,000 and 29% earning more than $50,000. In contrast, transactional users are generally less affluent, with nearly 60% earning less than $50,000.
-
Financial Access: There's a clear distinction in financial access and inclusion. Investor crypto holders are more likely to have traditional banking relationships, credit cards, and retirement savings. Conversely, transactional users, while still having access to bank accounts and credit cards (though to a lesser extent than investors), exhibit a higher proportion of unbanked individuals compared to the general U.S. population.
-
Market Behavior and Correlation: The article briefly touches on recent market trends, noting the correlation between cryptocurrency markets (specifically Bitcoin) and equities markets, particularly the S&P 500. It highlights the recent downturn in the crypto market, attributing it partly to increased correlation with equity markets and the influence of institutional investors.
-
Price Movements: It mentions the recent volatility in cryptocurrency prices, specifically Bitcoin, which saw a decline below $30,000 followed by a subsequent 11% rally that pushed it to $31,700.
This information underscores the evolving nature of the cryptocurrency landscape, revealing the socio-economic divides among holders and the changing correlation between digital assets and traditional financial markets. Moreover, it highlights the challenges and opportunities posed by the integration of cryptocurrencies into the broader financial ecosystem.
Continued monitoring and analysis of these trends are crucial for understanding the evolving dynamics of cryptocurrencies, their adoption, and their broader implications for global finance and society.
