Who's Biting on Bitcoin and Why?

In recent months, we've seen the launch of a new (and questionable) bitcoin futures exchange-traded fund, a plethora of new cryptocurrencies hit the market, and bitcoin become legal tender in the country of El Salvador. So, what's next for cryptocurrency?

Well, one of the first questions we should ask is: Who is driving the push into cryptocurrency investment in the first place? Then, we can start to answer the question everyone seems to be wondering: Is cryptocurrency going to take over the world?

To answer these questions, we'll turn to research from Morningstar's Stan Treger. His research offers insights into what separates crypto investors from their peers.

Decrypting Cryptocurrency Investing Trends

The move into cryptocurrency investment is pretty broad and recent.

For instance, our research found that 28% of respondents reported owning cryptocurrencies--a tremendously large portion of the public investing in an asset that no one really knew about a decade ago. Indeed, a recent study by the crypto platform Gemini found that 68% of respondents said they had started investing in cryptocurrencies within the past two years.

It's worth noting, however, that the sample of Americans used in our survey is slightly skewed toward those with a lower income. So, the percentage of all U.S. investors owning cryptocurrencies may look a little different.

Second, ownership of crypto is highly uneven. It decreases with age and increases with ownership of other assets. This study was most unique in the way it focused on investor psychology. It found that those who invested in cryptocurrencies tended to have what's known as a focus on promotion--achieving gains or goals instead of preventing bad outcomes.

After controlling for other factors, the study also found that those with a shorter time horizon are more interested in crypto. In other words, the longer people tend to plan ahead, the less interested they are in cryptocurrency investment.

Would you care to guess what came out as one of the strongest predictors of interest in future cryptocurrency investment? Already owning it. There's a group of people who clearly have experience and interest in the cryptocurrency space, which leads to further exploration and investment.

This also leads us to our final point: Despite what you may have seen in headlines or on social media, cryptocurrency is not taking over the world.

As noted in Treger's previous research, cryptocurrency investing doesn't rank highly in people's priorities for retirement investing, even among younger, generally pro-crypto audiences. In this research, we found that ownership of crypto is considerably lower than ownership of individual stocks (outside of mutual funds and retirement plans), and far lower than investing via a retirement account.

The role that cryptocurrency investing will play in the future is yet to be seen. But we'll continue to research the role it currently plays in investors' short- and long-term goals to gain a clearer understanding of what that future might look like.

Beyond cryptocurrency, Treger also leveraged a national sample of Americans to examine the psychology of investors to better understand why some people who have the means to become investors do so, while others don't. We examined that question further in a whitepaper.