Owners of cryptocurrency are different from you and me—unless one of us happens to be a younger male with higher earnings and libertarian or politically independent leanings, probably not white, and impervious to the possibility of an 80 percent wipeout.

That’s among the findings of Chicago Booth’s Michael Weber, University of California at Berkeley PhD student Bernardo Candia, University of Texas’s Olivier Coibion, and UC Berkeley’s Yuriy Gorodnichenko. They developed a snapshot of the one in 10 Americans who buy bitcoin and the like on the basis of responses to quarterly surveys sent, starting in 2018, to US households participating in what’s now known as the NielsenIQ Consumer Panel.

The researchers delved into the data on individuals who buy cryptocurrencies: their characteristics, their motives, and the ramifications of their perceptions and resulting decisions. Knowing who’s in crypto is important for understanding turbulence in the market, they argue.

“Their actions can trigger the bursting of asset price bubbles, leading to a sharp contraction in the cryptocurrency price,” Weber says.

In 2021, bitcoin’s price soared by 60 percent, peaking above $68,000. This attracted a surge of new investors captivated by the promise of similar future gains. However, the currency then plunged almost 80 percent in 2022 to just $16,000. It was a classic bubble: The allure of high returns from a novel speculative asset can pave the way for new investors to go after similar gains. Yet the resulting price surge often defies market realities, leading to a sudden price collapse and huge losses for investors.

The researchers sent questions about crypto to about 80,000 American households, and the questions elicited 15,000–25,000 responses per survey. They also sent additional information—about inflation, returns, and volatility—to randomly selected groups of survey respondents.

The resulting data show that crypto ownership surged in 2021–22 from around 3 percent of the US population to 11 percent. And even after the bubble burst, ownership continued rising to 12 percent.

Survey responses also cast a spotlight on the contrasts between cryptocurrency holders and the broader US population. Crypto owners viewed bitcoin, ether, and dogecoin as avenues for considerable returns and for portfolio diversification. Some perceived of cryptocurrencies as a way of retaining value and hedging against inflation, while others cited the aim of advancing digital currencies.

Why people buy and don’t buy crypto

Crypto investors reported high expected returns and a desire to diversify their portfolios. Respondents who didn’t own crypto took the opposite stance: they viewed crypto as a risky, bad investment. Many of the naysayers also cited their lack of knowledge as a reason for not investing.

By contrast, those on the sidelines professed a lack of understanding of the asset class. Many also said they thought of crypto as a risky or unproductive addition to their investment portfolios.

Owners maintained a dramatically more positive outlook for bitcoin. Those surveyed in late 2021 predicted a 22 percent gain for the following year, while nonowners put that number at 7 percent.

Cryptocurrency holders were less concerned by risks to all asset classes, and less worried by inflation, the researchers find. Individuals expecting higher inflation projected bigger returns from crypto investments, in line with the perception of cryptocurrencies as a hedge against price increases.

These differences translated into distinct investment choices. The role of expected returns took precedence over other attributes in determining whether or not to own cryptocurrency, the researchers find. Changes in bitcoin prices affected whether crypto owners made big purchases such as cars, appliances, and furniture, though everyday spending didn’t budge.

“Crypto is perceived like lottery winnings and is spent in one go,” Weber says.

The researchers conclude that crypto is more than a niche interest, or more than “gold for nerds,” as comedian Stephen Colbert put it. The asset class stands out in a few ways. In contrast with their perceptions of other assets, crypto-owners are uncertain about its returns. Yet its role as an inflation hedge in their minds is clearer than that of gold and housing.

The survey results prompt the researchers to suggest that sharing information about cryptocurrency holds the potential to sway investment decisions, creating a bridge between expectations and actions. Survey respondents often adjusted their investment mix in response to information, coming to favor cryptocurrency over stocks, and more of them ended up owning cryptocurrency when they expected prices to rise. This was especially true for people who initially didn’t know about cryptocurrency.

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