The Federal Reserve’s annual report on “The Economic Well-Being of American Households” for 2021 said that Americans have significantly higher levels of cryptocurrency ownership among high-income groups. 46% (nearly half) of U.S. crypto investors make $100,000 or more per year, while 29% make less than $50,000.
However, the situation is different for transactions with cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). Fewer than 24% of trading users earn more than $100,000. By comparison, six in 10 adults earn less than $50,000.
The Federal Reserve survey asked several questions about cryptocurrencies and found that 12% of Americans will buy their cryptocurrency holdings in 2021.
Overall, 11 percent of people hold cryptocurrencies as investments, 2 percent use cryptocurrencies to buy goods, and as little as 1 percent use cryptocurrencies to send money to friends and family, the findings noted.
Additionally, 13% of users who pay with crypto do not have a bank account in the United States, and 27% do not have a credit card. On the other hand, people are keen to invest in crypto for their retirement savings. It noted that 99% of cryptocurrency investors have bank accounts but do not use them for trading, and 89% of non-retired cryptocurrency investors have at least some retirement savings.
What’s Driving Cryptocurrency Adoption in the U.S.?
The United States has become a hotbed of cryptocurrency development. The government and some states, like New York and Miami, have their own digital “city coins” called NewYorkCoin (NYC) and MiamiCoin (MIA).
Other states have enacted laws that favor the use of cryptocurrencies. For example, lawmakers in Arizona have proposed paying taxes in cryptocurrencies, boosting adoption by residents of the state.
Additionally, cryptocurrency-related businesses and companies such as Coinbase (COIN) and Kraken (KRAK) have established bases in the United States, enabling Americans to quickly buy cryptocurrencies.
Another major driver of cryptocurrency adoption among U.S. citizens is the acceptance of cryptocurrencies as a payment medium by many merchants.
Crypto adoption in the U.S. is growing
The U.S. view of cryptocurrencies as a mere investment vehicle has shifted over the past few years. More and more people, especially young people, are now aware of crypto investing and trading. When the BTC price climbed to an all-time high and reached $67,000 in November 2021, the number of cryptocurrency investors in the United States increased exponentially.
However, the recent collapse of the Terra network has dragged down prices across the cryptocurrency market, making the future murky. According to Glassnode, nearly 40% of Bitcoin holders lose money on their investments.
Ben McMillan, chief innovation officer at IDX Insights, a crypto-focused asset manager, said: “When you see the power of this technology, it’s impossible not to be bullish. Right now, that doesn’t mean it’s going to be an upward line . . That doesn’t mean it won’t be an unstable road.”
He noted that many investors do not understand the risks posed by these asset classes. Many of them instead see it as “a digital version of gold, or an inflation hedge,” he said.
Notably, Federal Reserve Governor Christopher Waller said the public will demand regulation of the cryptocurrency market as investors continue to suffer heavy losses. Waller referred to the Terra incident and said that we saw this happen on the Terra ecosystem just a few weeks ago, when ordinary users were seeking compensation, and even veteran DeFi players were discussing how to compensate retail investors. According to Waller, new and innovative financial technologies are often regulated at the request of the public when negative events across the industry cause unavoidable losses for ordinary investors. Regulation of the industry is not about protecting the rich, but society as a whole, Waller said.