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How to know if you’re rich in crypto? You hold it, you don’t spend it

June 1, 2022, 11:44 AM UTC

There is a growing divide between two types of cryptocurrency owners: Those who hold it and those who spend it.

In the first-ever economic well-being survey to include questions about cryptocurrency, the U.S. Federal Reserve found very different profiles of the 12% of U.S. adults who own crypto.

While around 10% of U.S. adults said they bought or held crypto assets such as Bitcoin or Ether as an investment, around 2.5% say they either bought something with it or sent it to family and friends.

The cryptocurrency owners who held on to the coins had a disproportionately higher income and had access to bank accounts, credit cards, and retirement savings. “Those who held cryptocurrency purely for investment purposes were disproportionately high-income, almost always had a traditional banking relationship, and typically had other retirement savings,” the Fed wrote.

Meanwhile, those who spent or transferred their digital coins were disproportionately unbanked and low-income, suggesting that crypto holders use the coins as a high-risk speculative asset while transactional users depend more on its purchasing power to buy things and transfer money.

The two crypto owners

Of the people who held on to crypto as an investment, 46% reported an income over $100,000 while another 29% were earning more than $50,000. Almost every single person investing in crypto had a bank account and 89% were saving for retirement.

Meanwhile, transactional crypto spenders—who made up a far lower percentage of the crypto owning population—were much less well off. Almost 60% of transactional crypto users had an income less than $50,000 and only about 24% had an income exceeding $100,000. These users were also far less likely to have bank accounts. Around 13% of transactional crypto users lacked bank accounts compared to the 6% of adults who lack bank accounts across the U.S. regardless of crypto ownership status.

The report paints a picture of these crypto spenders as living further outside the traditional financial system overall. While 99% of crypto holders have bank accounts, 87% of crypto spenders can say the same. And while around 97% of crypto holders have a credit card, only 73% of crypto spenders do so.

The downturn of the crypto market

The crypto market has not been smooth sailing in recent weeks, with Bitcoin and other cryptocurrencies recently falling to their lowest levels since July 2021.

And while crypto was once positioned as a hedge against inflation, Bitcoin and other cryptocurrencies have increasingly begun to move in tandem with equities markets as institutional and professional investors have taken bigger stakes in digital coins.

Bitcoin’s 40-day correlation with the S&P 500 benchmark reached a record 0.82 in May, according to Bloomberg data, as shocks that pushed investors to retreat to safer corners of the market began to hit riskier tech stocks and cryptocurrencies more so than other assets.

The recent downturn of global equity markets dropped the price of Bitcoin below $30,000, though a 11% rally last weekend sent it to $31,700.

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