Fed says nearly half of U.S. crypto investors are high-income earners

The Federal Reserve's annual report on the "Economic Well-Being of American Households" in 2021 stated that Americans' cryptocurrency ownership levels are significantly higher among high-income groups. 46% (nearly half) of American crypto investors have an annual income of $100,000 or more, while 29% have an income of less than $50,000.

However, the same cannot be said for those who trade cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). Less than 24% of those who trade earn more than $100,000. In contrast, six in ten adults earn less than $50,000.

The Fed survey asked several questions about cryptocurrencies and found that 12% of Americans purchased and held cryptocurrencies in 2021.

The survey results indicate that overall, 11% of people hold cryptocurrencies as investments, 2% use cryptocurrencies to purchase goods, and as low as 1% use cryptocurrencies to send money to friends and family.

In addition, 13% of users who use crypto payments do not have bank accounts in the United States, and 27% do not have credit cards. On the other hand, people are keen to invest in crypto for retirement savings. It points out that 99% of cryptocurrency investors have bank accounts but do not use them for transactions, and 89% of non-retired cryptocurrency investors have at least some retirement savings.

What’s Driving Crypto Adoption in the U.S.?

The United States has become a hotbed for cryptocurrency development. The government and some states, such as 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, Arizona lawmakers have proposed paying taxes in cryptocurrencies, boosting adoption among 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 purchase cryptocurrencies.

Another major driver for the adoption of cryptocurrencies by U.S. citizens is the fact that many merchants accept cryptocurrencies as a medium of payment.

Cryptocurrency adoption is growing in the United States

Over the past few years, there has been a shift in the US’s perception of cryptocurrency as merely an investment tool. 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 US grew 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 have lost money on their investment.

“When you look at the power of this technology, it’s impossible not to be bullish,” said Ben McMillan, chief innovation officer at IDX Insights, an asset management firm focused on cryptocurrencies. “Now, that doesn’t mean it’s going to be a straight line to the upside. That doesn’t mean it’s not going to be a volatile path.”

He noted that many investors do not understand the risks that come with these asset classes. Many of them instead view them as “a digital version of gold, or an inflation hedge,” he said.

It is worth mentioning that Christopher Waller, a governor of the Federal Reserve, said that the public will demand regulation of the cryptocurrency market as investors continue to suffer severe losses. Waller mentioned the Terra incident and said that we saw this situation in 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, when negative events occur throughout the industry and cause inevitable losses to ordinary investors, new and innovative financial technologies are usually regulated at the request of the public. Waller said that regulation of the industry is not to protect the rich, but to protect society as a whole. (This article is compiled from FX Empire)