(FRASER).
Are we seeing a bit of buyers' remorse from consumers when it comes to holdings of crypto assets?
After doubling from 2019 to 2020 and again from 2020 to 2021, the shares of US consumers owning crypto assets stalled at about 10 percent in 2022, according to new data from the Atlanta Fed's Survey and Diary of Consumer Payment Choice. The Survey of Household Economics and Decisionmaking
(SHED) from the Board of Governors finds similarly: 10 percent of adults held or used cryptocurrency in 2022, down 2 percentage points from 2021.
This makes us think that the get-rich-quick allure of crypto speculation waned in the wake of the spring 2022 market crash. The chart below shows the price of bitcoin (orange dots) and the share of consumers owning some bitcoin (blue columns) at each of the annual implementation dates of the Survey and Diary of Consumer Payment Choice.
Looking at October 2022 ownership of crypto, you can see that about six months after the May 2022 price decline, the share of consumers owning crypto assets did not grow from 2021. Conversely, when the price had taken a big jump in 2021, shares of ownership doubled from 2020.
This is pretty much the opposite of Benjamin Graham's investing philosophy, which sees weakness as a time to buy and strength as a time to sell. In this data, crypto speculators appear to buy high and refrain from buying low.
Other hints that buyers' remorse took hold in fall 2022:
- In 2021, 82 percent of owners said they owned crypto for investment. In 2022, that was down to just 68 percent of owners. Gaining in popularity: interest in new technologies, which increased from 13 percent of owners to 20 percent.
- In 2021, 87 percent of crypto owners had bought crypto in the past 12 months. In 2022, that share was down to 58 percent.
About a quarter of the crypto owners responding to the SHED used it to pay or send money. The other three-quarters were owners for investment only, not for transactions. Wealthier adults were more likely to own for investment only. Lower-income adults (earning less than $25,000 a year) were more likely to use crypto to pay or send money. Black and Hispanic adults were more likely to use crypto for transactions than were White or Asian Adults. Use of crypto assets for payments was more common among people without a bank account and those who used money orders and nonbank check cashing services.
Our point of view: buyers' remorse is real. Euphoria, anxiety, and regret all apply to crypto.
By Kevin Foster, survey director in the Economic Survey Research Center and
By Claire Greene, payments risk expert in the Retail Payments Risk Forum, both at the Atlanta Fed