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Advisors that have been in the game long enough know that there are some investing “stereotypes” that exist because, well, they often prove accurate. For example, it’s common for retirees to have at least some exposure to municipal bonds because the asset class offers income and isn’t volatile.
Conversely, a client in their 30s can and should be more aggressive and thus can indulge growth stocks, small-caps and other riskier fare. However, until recently, there hasn’t been much examination into who owns bitcoin among individual investors. It’s an appropriate time for such analysis because, at this writing, the largest digital currency is flirting with $100,000.
Add to that, one in seven Americans own at least some bitcoin and 95% have heard of it. Obviously, advisors likely want more demographic detail regarding bitcoin owners and The Nakomoto Project obliges with the “Understanding Bitcoin Adoption in the United States: Politics, Demographics, & Sentiment” study, which was released earlier this year.
It’s definitely worth a read for multiple reasons, including the fact that this is the first population-level analysis of bitcoin ownership in the U.S.
Some Stereotypes, Some Surprises
If one were to speculate as to commonality among bitcoin owners, it’s almost certain they’d guess the bulk of those investors are younger and many are male. Both are true, but no in extreme senses.
There are also some surprises regarding bitcoin ownership at the levels of education and earnings. It’d be reasonable to assume that the vast majority of American bitcoin owners are high earners with college degrees or beyond. Indeed, the income group that the Nakomoto Project found to have the highest levels of bitcoin ownership was $100,000 to $119,000 per year. However, the levels of ownership among those in the $25,000 to $39,000 and the $75,000 to $99,000 groups was almost the same.
As for education dynamics, the study indicates the biggest demographic of bitcoin owners are folks that went to college but didn’t finish. Interestingly, bitcoin ownership is relatively close among people that went that have high school diplomas and those with college degrees.
As for politics, advisors could hardly be blamed if they assumed that most bitcoin holders are conservative. After all, the cryptocurrency has surged since President-elect Trump won and was the first overtly pro-crypto candidate in history. However, that doesn’t mean the majority of bitcoin owners are Republicans.
“* As another means of measuring political orientation, we asked respondents to indicate where they fell on a 10-point scale from ‘left’ to ‘right,’ observes the Nakomoto Project. “Once again—just like non-owners—Bitcoin owners spanned the whole spectrum, but clustered in the middle with a slight tendency to hold more extreme views on both the left and the right. These results hold for both social left-right measures and economic left-right measures. There is no significant distinction between Bitcoin owners and non-owners.”
The caveat here is that the study was conducted several months prior to Election Day.
What Can Be Predictive of Bitcoin Ownership
In very simple terms, demographic, political and moral foundation (there’s a section in the study on this and it’s worth reading) data are not instructive in terms of predicting bitcoin ownership. Looked at in potential real world terms, the right-leaning plumber Missouri that went to trade school is just as likely to be a bitcoin investor as is the Standford-educated liberal that works at Google and lives in the Bay Area.
So it’s easy to identify what does not work in terms of identifying bitcoin owners, but what does? As the Nakomoto Projects notes, there are some tells. Those include folks that are big believers in bitcoin as a technological tool and those that view it as a force for good that’s evening an otherwise tilted financial services playing field. Translation: a tech geek/enthusiast with a moral compass could very well be a bitcoin owner.
“What correlates most strongly with Bitcoin ownership is not who you are, so to speak, but how much you know about Bitcoin, and whether you think it is useful, trustworthy, and good,” concludes the Nakomoto Project. “The 14% of Americans who own Bitcoin, it turns out, are not members of some particular political tribe. Rather, they are simply Americans who have taken the time to study the technology and formed positive attitudes about it.”