All the young dudes carry the bags
If you’re in the US, and into crypto, chances are you’re:
— nursing losses
You’re also likely to be:
These hypotheses come from a JPMorgan report focused on Bitcoin that came out earlier this week, which has a boring title (“The Dynamics and Demographics of US Household Crypto-Asset Use”), but some fun facts.
Using data covering nearly five million active US checking account customers, about 15 per cent of whom have made transfers to crypto accounts, authors Chris Wheat and George Eckerd found:
1) Most crypto users made their first transactions during spikes in cryptoasset prices.
2) Usage of crypto is broader and deeper for men, Asian individuals, and younger individuals with higher incomes.
3) Crypto holdings for most individuals are relatively small — as median flows equal less than one week’s worth of take-home pay — but almost 15 per cent of users have net transfers of over one month’s worth of pay to crypto accounts.
4) Most individuals who transferred money to crypto accounts did so when cryptoasset prices were significantly higher than recent levels, and those with lower incomes likely made purchases at elevated prices relative to higher earners.
The first point is pretty strikingly illustrated: in terms of noobs getting burnt, Bitcoin looks like one of the greatest top-ticks in history:
In a statement of the totally obvious, JPM says:
The intensity of transfer activity at certain points in time, correlated with price movements, suggests herd-like behaviour driving a notable share of individuals’ overall transactions with crypto accounts.
The greenhorns seem to have been pretty bad at judging when to buy, but sellers don’t appear to have performed much better. JPM notes that the net direction of transfers seems to have become reasonably balanced in the past year, after the biggest spikes in selling seem to have missed the price peaks.
It’s interesting that after waiting too long in early 2021, sellers (as a generalised collective) then went too early during the end-of-year spike.
And who were these crypto holders, you may ask. Perhaps unsurprisingly, they were men — young men:
Moderately more revelatory is the racial breakdown JPM has produced, which found Asians were much more likely than whites, Hispanic or black account holders to be getting down with the cryptness:
The most interesting finding comes later on, when the bank digs into different groups’ relative profitability in trading crypto. From JPM:
With crypto asset prices showing substantial volatility over the previous five years, there is potential for a wide range of average transaction prices and therefore investment returns…
Looking at the distribution of average purchase prices — measured at the individual level — across our sample, we see substantially different median implied purchase prices to crypto by income group.
Here’s how the broad thing looks (for chart haters, basically bitcoin investors done bad):
Even MORE interesting, though, is JPM’s analysis of which demographic most successfully bought dips (and probably made more money). Put your answer on a piece of paper, then scroll…
. . . yeah it’s rich old people.
Get wrecked, millennials.