The Crypto Craze: Millions Invested In Digital Currency

Cryptocurrency has become a buzzword, with everyone from billionaires to Wall Street gurus and celebrities discussing it. But how many people are actually investing in crypto? According to various surveys, around 10% of people currently invest in cryptocurrencies. A Pew Research Center survey found that 16% of Americans have invested in, traded, or used cryptocurrency, while another survey found that 11% of people in the US have invested in crypto. A recent poll, however, showed that only 8% of Americans invest in any form of cryptocurrency, with 5% investing in Bitcoin, 2% in Ethereum, and less than 1% in Ripple.

Who owns crypto?

As of March 2024, there are over 46 million Bitcoin wallets with at least $1 worth of Bitcoin in them. However, around 90% of these wallets are inactive or hold minimal value. Less than half of these wallets (21.5 million) are worth more than $100, and around a quarter (22.2%) are worth more than $1,000.

Research from July 2021 shows that 89% of American adults have heard of Bitcoin, with 27% saying they would consider investing in cryptocurrency and 13% saying they already had. A more recent survey from July 2023 found that 26% of millennials owned Bitcoin, compared to 14% of all US adults.

Gen Z and millennials make up as many as 94% of crypto buyers. As of August 2021, 29% of millennial American parents owned cryptocurrency, compared to 13% across all generations.

According to a report by Morning Consult, 70% of cryptocurrency owners are men, and women make up 30%. However, men represent only 48% of the general population, while women make up 52%.

In terms of the broader cryptocurrency market, it is estimated that 1 billion people worldwide use cryptocurrencies. The total market capitalisation of all cryptocurrencies as of March 2024 was $2.41 trillion, with Bitcoin contributing $1.32 trillion (approximately 55%).

Why invest in crypto?

There are several reasons why someone might choose to invest in cryptocurrency. Here are some of the most common:

Diversification

Cryptocurrency can add diversification to an investment portfolio. As a relatively new and highly volatile asset, it often has little correlation with the price movements of more traditional investments like stocks and bonds. This means that adding a small allocation of cryptocurrency to a portfolio has the potential to increase returns without increasing risk, assuming the rest of the portfolio is made up of less-risky assets.

Appreciation

The price of cryptocurrencies like Bitcoin and Ethereum has appreciated significantly over time, and investors are hoping that this trend continues. For example, Bitcoin's price rose from $17,000 in early 2023 to a high of over $73,000 in March 2024. Ethereum has also seen tremendous growth, with its market cap increasing from $30 billion in 2020 to over $1.3 trillion in 2024.

Decentralization

Cryptocurrencies are decentralized, meaning they are not controlled by any central authority like a government or central bank. This is appealing to investors who are concerned about the potential for governments to devalue their currencies through inflation or capital controls.

Technology

Cryptocurrencies are made possible by blockchain technology, which has many potential applications beyond digital currencies, including smart contracts, supply chain management, and financial services. Investing in cryptocurrencies can be a way to gain exposure to the potential of blockchain technology.

Ease of Use

Cryptocurrencies can be easily bought, sold, and transferred using online exchanges and wallets, making them more accessible than many other investments.

Speculation

Finally, many investors are attracted to the speculation and gambling aspects of cryptocurrency. The large price swings, new developments, and media attention create a cycle of fear and greed that drives investors to trade frequently, hoping to profit from the volatility.

Crypto as an investment

Cryptocurrency is a digital currency that can be used to buy goods and services or traded for a profit. Bitcoin is the most widely used cryptocurrency.

People invest in cryptocurrencies for the same reason anyone invests in anything. They hope its value will rise, netting them a profit. If demand for Bitcoin grows, for example, its price in dollars would increase. So, if you'd purchased Bitcoin before that increase in demand, you could theoretically sell it at a higher price, making a profit.

Since its inception, Bitcoin has been regularly derided as worthless or a scam, in part because its price is prone to meteoric rises and dramatic falls. However, it did recover from a collapse in 2022, hitting record highs in early 2024. This surge could be attributed to approval by the SEC of spot Bitcoin ETFs in Jan. 2024, giving large asset managers a way to offer their clients exposure to Bitcoin.

But Bitcoin's 2024 price rise is also due to other factors. Every four years, "Bitcoin halving" occurs, cutting the mining reward in half. The anticipation of fewer Bitcoins entering the market drives up the price.

Pros and cons of cryptocurrency

Cryptocurrency inspires passionate opinions across the investor spectrum. Some supporters like the fact that cryptocurrency removes central banks from managing the money supply. In communities underserved by traditional finance, some see cryptocurrencies as a promising foothold. Other advocates like the blockchain technology behind cryptocurrencies because it’s a decentralized and secure processing and recording system.

Many cryptocurrency projects are untested, and blockchain technology has yet to gain wide adoption. For shorter-term crypto investors, there are risks. Its prices tend to change rapidly, and while that means that many people have made money quickly, many others have lost money.

The environmental impact of Bitcoin and other projects that use similar mining protocols is significant. A comparison by the University of Cambridge said worldwide Bitcoin mining consumes more than twice as much power as all U.S. residential lighting.

Crypto can be a good investment for someone who enjoys speculating and can financially tolerate losing everything invested. However, it is not a wise investment for someone seeking to grow their retirement portfolio or for placing savings into it for growth.

Crypto demographics

Cryptocurrency has become increasingly popular, with an estimated 300 million people worldwide owning some form of cryptocurrency as of the end of 2021. This popularity is reflected in the growing number of daily Bitcoin transactions, which averaged approximately 378,000 between January 29th and March 18th, 2024.

Gender

Crypto ownership is predominantly male, with men making up 70% of cryptocurrency owners globally, despite comprising only 48% of the general population. This trend is also observed in the United States, where male crypto ownership stands at 62%.

Age

Millennials and Gen Z individuals are the most prominent investors in cryptocurrency. In the US, 26% of millennials owned Bitcoin, compared to 14% of all adults. Additionally, 29% of millennial parents owned some form of cryptocurrency as of August 2021. This trend is also observed in the UK, where individuals aged 18-34 are twice as likely to own cryptocurrency compared to those aged 35-54.

Income

In the United States, high-income earners are overrepresented among crypto investors. Individuals earning $100,000 or more annually make up 25% of crypto owners, despite comprising only 15% of the general population.

Ethnicity

In the United States, crypto ownership among different ethnic groups varies. According to a 2021 survey, 78% of white men and 71% of white women reported being aware of Bitcoin, compared to 66% of Hispanic and 61% of African-American respondents.

Geography

Crypto adoption varies globally, with India, Nigeria, and Vietnam ranking as the top three countries on Chainalysis' global crypto adoption index as of September 2023. Many high-adoption countries are developing markets, such as Ukraine, Indonesia, and the Philippines.

Crypto's future

The future of crypto is a hotly debated topic, with some believing it will become a widely accepted form of currency, while others predict it will remain a volatile and speculative investment. Currently, an estimated 1 billion people use cryptocurrencies globally, with around 50 million people owning Bitcoin, the most well-known cryptocurrency.

In the United States, crypto ownership is disproportionately high among high-income earners, with those making $100,000 or more annually comprising 25% of crypto owners. Additionally, 70% of cryptocurrency owners are men, despite men only making up 48% of the general population. Crypto is also particularly popular among younger generations, with 94% of crypto buyers being Gen Z or Millennials.

The regulatory landscape for crypto is still evolving, with governments and financial institutions trying to understand how to oversee this new asset class. In the US, major exchanges like Binance, Kraken, and Coinbase are embroiled in litigation with the Securities and Exchange Commission (SEC). However, there is growing support for crypto from major presidential candidates, and the introduction of the Financial Innovation and Technology for the 21st Century Act (Fit21) aims to provide clearer guidelines for digital assets.

The volatility of cryptocurrencies like Bitcoin makes them difficult to use as a functional currency, as major currencies need to be mostly stable to act as a medium of exchange. Additionally, the energy consumption and environmental impact of crypto production have sparked concerns. Bitcoin alone is estimated to consume as much electricity as all the data centers in the world and contribute to an estimated 0.60% of the world's electricity consumption.

Despite these challenges, crypto has gained traction as a method of payment for some companies, including AT&T, Twitch, AMC Theaters, and the Dallas Mavericks. The total market capitalization of all cryptocurrencies as of March 2024 was $2.41 trillion, with Bitcoin contributing $1.32 trillion.

In conclusion, the future of crypto remains uncertain. While it has gained widespread adoption and traction among investors, particularly younger ones, it faces regulatory hurdles and environmental concerns. As governments and financial institutions work to understand and oversee this new asset class, the volatility of cryptocurrencies may make them more suitable as trading vehicles for profit rather than functional currencies.

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