A new survey shows most U.S. digital asset holders don’t give a damn about using their tokens for any functional purpose, just so long as the ‘number go up.’
The National Bureau of Economic Research (NBER) recently released a working paper on U.S. households’ attitudes toward digital assets. Titled “Do You Even Crypto, Bro? Cryptocurrencies In Household Finance,” the NBER sought to understand cryptocurrency investment decisions and motives relative to other financial assets such as stocks, bonds, and gold.
The paper’s data was drawn from quarterly surveys of some 80,000 households conducted by the Nielsen Homescan Panel. Starting in 2021, participants who acknowledged owning digital assets—classified as ‘crypto-owners’—were asked about their reasons for buying, their expectations, and expected returns. Participants who didn’t hold digital assets were asked a parallel set of questions.
The survey found that the overall percentage of crypto-owners rose from 3% to 11% during the 2021-22 value bubble. The most popular token was BTC, which was held by around 7% of households, followed by ETH and DOGE (both a little over 4%), with Litecoin and Stellar (XLM) under 2%.
It won’t come as much surprise to learn that crypto-owners were found to be disproportionately young, higher-earning males with Libertarian sensibilities. They’re also “less likely to be white,” adding some weight to the “predatory inclusion” claims recently leveled against digital asset firms by the New York Attorney General’s office.
By a wide margin, crypto owners’ dominant reason for having crypto was “their expected increase in value.” Portfolio diversification was a distant second, with ‘store of value’ even farther back in third place.
The next most popular reasons were the highly noble (although we suspect some self-aware insincerity) desire to “contribute to the development of crypto.” This was followed by a desire to protect against inflation and make oneself “independent of banks.” Surprisingly, transaction/purchase anonymity is barely registered with crypto-owners in terms of digital asset desirability.
The dominant reason cited by non-crypto-owners for their lack of ownership was a lack of sufficient information to make them feel sufficiently comfortable taking this plunge. Satisfaction with their current asset portfolios ranked second, while crypto’s perceived volatility placed third.
From there, reasons ranged from not knowing what crypto is, a view that crypto is simply a bad investment, not having enough money to buy crypto, and the belief that crypto has “no fundamental value.”
Faith trumps facts
The paper concludes that many people are “very uninformed” about digital assets, but the paper doesn’t specify whether those who claim to be informed are included with those who legitimately lack knowledge of the subject.
If that sounds like an unwarranted jab, consider that in Q3 2021, crypto-owners projected an average expected return of 22% on their tokens in 2022. In reality, BTC began Q3 2021 with a fiat value of around US$50,000 but closed out 2022 below $17,000 for a roughly two-thirds negative return. (This is why Warren Buffett tells people to stop trying to pick winners and just invest in index funds.)
The authors note that even when individuals are provided with greater information about digital assets, they often reach very different conclusions about their financial viability. This “absence of common information and beliefs” suggests price volatility will remain a feature/bug “for the foreseeable future.”
Furthermore, crypto-holders were more likely to be optimistic about digital assets’ future returns than non-holders, a trend that wasn’t visible in other asset classes. Translated: those who held stocks, bonds, or gold weren’t any more confident than non-holders that stocks, bonds, or gold would soar in value.
A similar schism held for crypto’s alleged reputation as an inflation hedge; If you hold crypto, you believe it will protect you from rising prices and currency devaluation. If you don’t hold crypto, you don’t view it as a better hedge than any other asset.
In other words, ‘crypto’ appears to be a faith-based phenomenon. Those who’ve drunk the Krypto Kool-Aid believe that tokens are future-proofed wonders with all sorts of gravity-defying qualities. Conversely, those who haven’t sipped from this enchanted cup also aren’t swallowing these claims.
However, non-crypto-holders who were told that digital assets had produced high returns in the past were more likely to buy some themselves, which could explain why crypto bros are so relentless in promoting their ‘to the moon’ fiat value forecasts. The faith-based Ponzi simply doesn’t work without a constant influx of new sucker money, so the irrationally exuberant forecasts of massive windfalls to come will continue.
The view that crypto ‘investing’ is akin to playing the lottery gets a boost from how those fortunate enough to earn a return on their ‘investment’ choose to spend their winnings. While investors in other asset classes tend to funnel their gains into everyday purchases, this type of measured spending was “effectively zero” for crypto winners, who tend to blow their gains on one big purchase.
How far we’ve fallen
The dominant view of digital assets as lottery tickets with a cultishly religious vibe is a far cry from the desire for a practical peer-to-peer system of “small casual transactions” expressed in Satoshi Nakamoto’s 2008 Bitcoin white paper. It reflects how effective the BTC Core developers who hijacked Bitcoin for their own ends have been in promoting Bitcoin pretender BTC as ‘electronic gold.’
The only real antidote to this speculative frenzy is the BSV blockchain, which not only realizes the ‘small casual transactions’ goal with the most cost-effective payment system in history, but also serves as an unparalleled data management platform.
BSV blockchain’s unique combination of unbounded scaling and ultra-low cost nano-transactions makes it the ideal platform for utility-focused projects. It’s also the only technology capable of handling the data needs of large enterprises and governments in full compliance with existing laws. By maximizing the potential of the power of IPv6, BSV blockchain will complete the development of the internet and transform Web3 from mere theory to practical reality.
But if that’s not your bag, go ahead and buy lottery tickets. Just buy them at your local bodega, not from a crypto exchange. At least this way, some of your money will be used for some government program rather than funding some crypto bro’s new Lambo.
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