With industry conversations around Web3 gaining momentum, 451 Research took a deep dive into cryptocurrency as part of its Connected Customer, Disruptive Technologies 2022 survey. The survey was fielded among more than 1,600 US respondents in Q1 2022. This article distills a sample of our key findings and takeaways on the current state of consumer cryptocurrency adoption and sentiment.
Cryptocurrency adoption and drivers
It’s still early on for consumer cryptocurrency adoption in the US, with uptake varying widely by demographic. Overall, 20% of respondents indicated that they have either bought, traded or received cryptocurrencies. The most robust adoption was seen with Gen Z (33%) and Millennials (35%), trailing off into the single digits for Baby Boomers and The Greatest Generation.
Our survey indicated that Gen Z and Millennials exhibit the greatest openness to new technology adoption and demonstrate the highest utilization of digital technologies – factors that we believe underscore their higher propensity to gravitate toward cryptocurrencies. The fact that Bitcoin was created amid the ‘Great Recession’ – a period that has profoundly shaped the views that many younger consumers have on their finances, institutions, and society at large – should not be lost on market stakeholders, either. Notable differences in cryptocurrency adoption were seen across a variety of other demographics, including gender (28% male vs. 12% female), residence (31% urban vs. 15% rural and suburban, respectively), and annual household income (18% <$100,000 vs. 27% >$100,000).
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When exploring the specific activities that cryptocurrency participants have engaged in, the message is clear: While most have bought cryptocurrencies (64%), a much smaller percentage are selling them (33%), and an even smaller percentage are using cryptocurrency as a payment method (19%). Essentially, most consumers that are engaging with cryptocurrency are treating it as an asset, much like they would a security (e.g., a stock).
Based on this finding, we’ve concluded that most consumers that have bought cryptocurrency have never moved their coins outside of the exchange where they purchased them (e.g., Coinbase, Binance). This is problematic when considering the widely discussed role for cryptocurrency as a medium of exchange in the Web3 economy. We see a variety of factors that have throttled the use of cryptocurrency for consumer-to-business payments, including:
- Usability problems associated with cryptocurrency wallets. Most cryptocurrency wallets are not intuitively designed for the average consumer. They also carry serious repercussions for mismanagement.
- Chargebacks and disputes. If a problem arises with a cryptocurrency transaction (e.g., fraud, product or service issue), by design there is no central intermediary akin to Visa and Mastercard to manage the dispute process and enforce consumer protections.
- Limited merchant acceptance. This is in part a result of a ‘chicken or the egg problem’ that often slows acceptance of new payment methods, but also due to the volatility and processing lag time associated with many cryptocurrencies.
In some ways, the more things change, the more they stay the same. The usability, liability and acceptance challenges associated with cryptocurrency payments has, for now, created more opportunity than challenges for the card networks. Visa, for example, has established partnerships with 65 different cryptocurrency exchanges and vendors, which in turn issue Visa cards that allow their users to instantaneously draw on their cryptocurrency balance to make purchases at any merchant where Visa is accepted. Through this strategy, Visa enabled approximately $2.5bn in consumer-to-business transaction volume in Q4 2021.
For nonusers, which was 80% of respondents, the three biggest cryptocurrency adoption inhibitors included a lack of understanding of the blockchain (32%), lack of investing in general (30%), and the overall complication of purchasing cryptocurrency (26%). At least two of these factors can be addressed via investments in education and usability by cryptocurrency exchanges and wallet providers.
In the near term, we anticipate that most traditional financial institutions will continue to proceed cautiously around cryptocurrency, in large part due to regulatory ambiguity. However, the recent inroads made by trusted bank partners such as Visa and Mastercard (e.g., both networks have launched dedicated cryptocurrency advisory services) is an encouraging development that could help to catalyze activity.
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