Bitcoin buyers drawn by rising prices, no dislike for banks: BIS report

by · November 14, 2022

Bitcoin (BTC) investors are more likely to be lured by the cryptocurrency’s rising prices, rather than their aversion to banks or its perceived use as a store of value, a new report from the Bank for International Settlements (BIS) suggests.

In a “BIS Working Papers” report published on November 14, the central banking body looked at the relationship between Bitcoin prices, crypto trading and retail adoption.

It studied the drivers of crypto adoption by retail investors using crypto trading app downloads as a proxy for adoption and user investment at the time of download.

It found that “an increase in the price of Bitcoin is associated with a significant increase in new users, i.e. the entry of new investors” and that most retail investors “downloaded crypto apps when prices were high.”

The BIS presented evidence that daily downloads of crypto exchange apps increased with the rapidly rising price of Bitcoin between July and November 2021, peaking when Bitcoin’s price was between $55,000 and $60,000 about a month before its all-time high in November 2021 of just over $69,000.

It added that 40% of crypto app users were men under the age of 35 and were part of the most “risk-seeking” segment of the population, from which it hypothesized:

“Users [are] to be attracted to Bitcoin by rising prices – rather than an aversion to traditional banks, the pursuit of a store of value or mistrust of public institutions.”

“The price of Bitcoin remains the most important factor when we control for global uncertainty or volatility, contradicting explanations based on Bitcoin as a safe haven,” it added.

The BIS assumed that app users purchased Bitcoin at the time of downloading a crypto app and then assumed that up to “81% of users would have lost money” if they had purchased Bitcoin above $20,000.

Daily downloads of crypto exchange apps of Bitcoin Price at the time of first download. Picture: BIS

BIS’s assumptions apparently correlate with data from blockchain analytics firm Glassnode, which confirmed on November 14 that just over half of Bitcoin addresses are in profit, hitting a two-year low.

BIS added its analysis of blockchain data found as Bitcoin prices rose, smaller users bought, and “the biggest holders (the so-called ‘whales’ or ‘humpbacks’) sold – making a return at the expense of the smaller users.”

Related: Turbulence for Blockchain Industry Despite Strong Bitcoin Fundamentals: Report

It also documented the geography of crypto app adoption and found that between August 2015 and June 2022, Turkey, Singapore, the United States and the United Kingdom had the highest total downloads per 100,000 people.

India and China had the lowest, the latter seeing just 1,000 crypto app downloads per 100,000 people, with the BIS believing greater legal restrictions on crypto are hindering retail in those countries.