Fed Report: Does BTC price change affect its holdings?

Source: Federal Reserve; Compiled by Tao Zhu, Golden Finance

Since January 2022, the Consumer Finance Association (CFI) has collected information about Crypto Assets ownership from six different surveys; all six surveys asked about the current holdings of Crypto Assets, and three of them also asked about the possibility of future purchases. Comparing the survey results with the performance of the Crypto Assets market, we observed a disconnect between market prices and holdings over the past two years. Although we saw a significant decrease in holdings and purchasing interest during the Crypto Assets winter of 2022, the recent rise in the market has not been accompanied by an increase in Crypto Assets holdings among the surveyed population.

Using BTC as a representative of the overall value of the Cryptocurrency market, we found that the Cryptocurrency winter reached its lowest point at the end of 2022; from January to October 2023, the price gradually rebounded at a relatively slow pace, and then accelerated rapidly in March 2024. Since then, they have remained at or near the highest point in five years.

Starting from October 2023, CFI has collected quarterly LIFE survey data indicating the amount of Crypto Assets held, allowing us to track holdings during pump periods in the market. These survey questions are similar to those in the 2022 CFI COVID-19 Consumer Survey for previous data collection. We found that although the amount held decreased significantly during the price decline of Cryptocurrency in the cold winter, it did not rise at a corresponding speed during the recovery period. However, the recent pump in prices seems to correspond with an increase in the proportion of respondents who may buy Crypto Assets in the future.

Differences in survey collection

The first two surveys collecting data on Crypto Assets ownership were conducted as part of CFI's COVID19 consumer survey in January 2022 and October 2022; the following four surveys were part of CFI's consumer lifestyle survey. There were two main differences between these two surveys, which led to slightly different results; however, comparing the weighted sums of responses to similar questions (excluding Crypto Assets questions) in the two surveys indicates that the results reported in both surveys are comparable.

The survey results were collected by two different research institutions. Both surveys were web-based and targeted 5,000 nationally representative survey results, weighted to a similar target distribution of major demographic categories. Comparable results were obtained for non-Cryptocurrency issues in both surveys, and the relationship between the demographic groups of Cryptocurrency holders from the two research institutions is consistent.

Although the ownership rates of the two surveys are not directly comparable, each survey collected information on more than one occasion. The two COVID-19 surveys covered the Cryptocurrency winter, while the four LIFE surveys covered the recent price recovery. Therefore, we can clearly compare the changes in ownership rates for each period.

To assess the relationship between the Cryptocurrency market conditions and the rate of ownership and future purchasing interest, we use the price of BTC (Bitcoin) as a proxy for the general Cryptocurrency market. Figure 1 plots the daily Closing Price of BTC between July 1, 2021, and July 9, 2024; the bar chart represents the rate of Cryptocurrency ownership cited in this article's surveys. Looking at the bar charts for January 2022 and October 2022, we see the changes mentioned in our previous report; during the Cryptocurrency winter, the price of BTC (and Cryptocurrency) dropped rapidly, and the rate of ownership also decreased.

Figure 1: BTC Closing Price (left axis) and Cryptocurrency Ownership Rate (right axis)

The October 2023 survey depicted in the graph is the first time the LIFE survey has collected data on the holding of Crypto Assets. Despite a pump in the market since the previous year, it has remained stable over the past six months, far below the value before the Cryptocurrency winter; the holding is basically the same as last year, at 17.1% (considering slight differences in focus of the question).

After the survey in October 2023, the BTC price started to pump. By the time of the LIFE survey in January 2024, the price had pumped by about 60%, recovering more than half of the value lost during the Cryptocurrency winter. However, the holding amount has slightly decreased to 15.5%.

The market continues to pump, and by April 2024, the price of BTC has exceeded its value before the cryptocurrency winter. We continue to see almost no change in the ownership rate; despite the significant increase in BTC value over the past six months, only 16.1% of respondents consider themselves cryptocurrency owners. This is statistically no different from the ownership rate in October 2023.

During the period from April to July 2024, the price of Bitcoin fluctuated but remained close to recent highs. In the LIFE survey in July 2024, respondents reported a significant decrease in BTC holdings to 14.7%. Once again, we see that market performance has not led to an increase in public holdings.

Future Purchasing Interests

Although the ownership rate in the LIFE survey data did not increase with the price pump, we did see an increase in the proportion of respondents who may purchase Crypto Assets in the future. Similar questions were included in the COVID-19 survey in 2022 and the LIFE survey in April 2024, and the results are reported in Table 1.

Our previous report recorded a general decline in interest in purchasing Cryptocurrency (including existing holders and non-holders) during the Cryptocurrency winter, dropping from 18.8% of all respondents to 10.6%. The next survey using the purchase intention question is the LIFE survey in April 2024, when the current price of BTC is at its highest point in three years.

At that time, 21.8% of the respondents said they might buy Cryptocurrency in the future; although this did not translate into a higher ownership rate for this group, the huge and rapid rise in the market seems to have increased its appeal to consumers.

From the perspective of non-holders' purchase intention, this observation is even clearer. In the 2022 survey, less than 7% of non-holders indicated that they might buy cryptocurrency in the future; however, in April 2024, this figure rose to 13.4%.

Conclusion

The CFI survey data collected in 2022 shows that Cryptocurrency holders have changed due to the Cryptocurrency winter; as market value decreases, reported holdings and interest in purchasing Cryptocurrency have both declined.

Since LIFE Survey began collecting data on Cryptocurrency holdings in October 2023, the price of BTC has pumped sharply; however, in four surveys, the volume of holdings has slightly decreased, despite evidence suggesting that market performance has increased interest in future purchases.

Additional research into the specific market entry and exit patterns of consumers may provide a clearer explanation for these observed results.