Bitcoin buyers drawn by rising prices, not dislike for banks: BIS report

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

In a “BIS Working Papers” report Published on Nov. 14, the central bank body investigated the relationship between Bitcoin prices, cryptocurrency trading, and retail adoption.

studied the drivers of cryptocurrency adoption by retail investors using cryptocurrency trading app downloads as a proxy for user adoption and investments 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 Applications surged with the rapid rise in the price of Bitcoin between July and November 2021, peaking when the Bitcoin price was between $55,000 and $60,000 about a month before its November 2021 all-time high of just over $69,000.

He added that 40% of crypto app users were men under the age of 35 and were part of the more “risk-seeking” segment of the population, from this he surmised:

“Users [are] being drawn to Bitcoin because of rising prices, rather than a dislike for traditional banks, a search for a store of value, or a mistrust of public institutions.”

“Bitcoin price remains the most important factor when controlling for uncertainty or global volatility, which contradicts Bitcoin-as-a-safe-haven explanations,” he added.

The application taken over by BIS users bought Bitcoin at the time of downloading a crypto app and subsequently surmised that up to “81% of users would have lost money” if they had bought Bitcoin for more than $20,000.

Daily downloads of cryptocurrency exchange applications for Bitcoin Price at the time of the first download. Image: BIS

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

The BIS added its analysis of blockchain data found as Bitcoin prices rose, smaller users were buying, and “larger holders (so-called ‘whales’ or ‘humpbacks’) were selling, making a profit.” at the expense of 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, respectively.

India and China had the lowest, the latter seeing just 1,000 crypto app downloads per 100,000 people with the BIS opining that further legal restrictions in crypto hamper retail adoption in those countries.