BIS Says Rising Prices Accounts for Mass Crypto Adoption

A report from the analysis made by the Bank for International Settlements (BIS) shows that retail customers are attracted to the crypto industry by the rising price of Bitcoin (BTC) and not by their animosity toward other financial institutions, especially, banks. The document which was published on Monday attempted to demystify the connection between  Bitcoin prices, crypto trading, and retail adoption.

As suggested in the 28-page BIS Working Papers dubbed ‘Crypto trading and Bitcoin prices: evidence from a new database of retail adoption’, BTC’s perceived nature as a store of value is not even the reason behind the massive adoption rate. Using crypto trading applications that are downloaded for adoption and user investments, BIS studied some drivers of retail crypto adoption.

The first finding according to the document is that “a rise in the price of Bitcoin is associated with a significant increase in new users, ie entry of new investors.” This assumption also takes into consideration other potential market drivers like the overall financial market conditions, uncertainty, or country characteristics.

Retail Investors Download Trading Apps When Prices Are High

Most of these investors downloaded crypto trading apps when the price of BTC was high. A clear example is between July and November 2021 when the BTC price was in a range of $55,000 to about $60,000 before it reached its all-time high of $69,000 in November. Markedly, crypto trading applications saw a massive volume of daily downloads during this time.

Also, it was discovered that 40% of BTC adopters are men under 35 years old which was categorized as the risk-taking sample of the population. In comparison to women and older men, this category is more sensitive to changes in the price of the coin. A user sensitivity was noticed in Andriod users, unlike iOS users who are assumed to be high-income earners. 

In the end, the report reiterated that these findings are consistent with its speculation which is “users being drawn to Bitcoin by rising prices – rather than a dislike for traditional banks, the search for a store of value or distrust in public institutions.” 

At the beginning of November, financial giant Morgan Stanley announced a fall in the adoption rate of BTC amongst blue-chip investors. The report by Morgan Stanley says that “those who bought/received Bitcoin more than six months ago are holding onto their positions, with some likely waiting for a price recovery.”