Bitcoin investors are more likely enticed by the cryptocurrency’s rising prices, rather than their dislike of banks or its perceived use as a store of value, a new report from the Bank for International Settlements (BIS) suggests.
In a “BIS Working Papers” report published on Nov. 14, the central bank body looked into the relationship between Bitcoin prices, crypto trading and retail adoption.
It studied the drivers of crypto adoption by retail investors using crypto trading app downloads as a proxy for adoption and user investments at the time of download.
It found that “a rise in the price of Bitcoin is associated with a significant increase in new users, ie entry of new investors” and that most retail investors “downloaded crypto apps when prices were high.”
The BIS presented evidence that daily downloads of crypto exchange applications increased with the rapidly rising price of Bitcoin between July and Nov. 2021, peaking when Bitcoin’s price was between $55,000 and $60,000, roughly one month before its Nov. 2021 all-time high of just over $69,000.
It added 40% of crypto app users were men under 35 and were part of the most “risk-seeking” segment of the population, from this, it surmised:
“Users [are] being drawn to Bitcoin by rising prices — rather than a dislike for traditional banks, the search for a store of value or distrust in public institutions.”
“The price of Bitcoin remains the most important factor when we control for global uncertainty or volatility, contradicting explanations based on Bitcoin as a safe haven,” it added.
The BIS assumed app users purchased Bitcoin at the time of downloading a crypto app and subsequently supposed that up to “81% of users would have lost money” if they had purchased Bitcoin over $20,000.
The BIS’s assumptions seemingly correlate with data from blockchain analysis firm Glassnode, who on Nov. 14 confirmed that just over half of Bitcoin addresses are in profit, reaching a two-year low.
The BIS added its analysis of blockchain data found as Bitcoin prices rose, smaller users purchased and “the largest holders (the so-called ‘whales’ or ‘humpbacks’) were selling — making a return at the smaller users’ expense.”
It also documented the geography of crypto app adoption and found between Aug. 2015 to June 2022, Turkey, Singapore, the United States and the United Kingdom had the highest total downloads per 100,000 people, respectively.
India and China had the lowest, the latter seeing only 1,000 crypto app downloads per 100,000 people, with the BIS opining that greater legal restrictions on crypto hamper retail adoption in those countries.
Charities accepting crypto donations are setting themselves up for an entirely new demographic of funders — who just so happen to be one of the most giving, according to charity organizations.
Alex Wilson, the co-founder of The Giving Block — a crypto donation platform providing back-end support to charities — told Cointelegraph that the crypto community is still a market many charity organizations have not interacted with.
The top charity organizations in the world by funds received including United Way Worldwide, Feeding America, and UNICEF. All three of them accept cryptocurrencies as a means of donation.
The Giving Block co-founder said the crypto community has been great with the “philanthropic use” of cryptocurrency, and those crypto donors are also some of the “most generous” — with the average gift being over $10,000.
UNICEF Australia New Product and Innovation Lead Zunilka Whitnall said it was important that charities implement blockchain technology to make their fundraising more transparent to the general public. She also noted that the technology will also give them access to a “new demographic of funders.”
Whitnall, however, noted that there is a “gap in understanding” of what blockchain is and how they work for many charity organizations.
Bryce Thomas, co-founder of Tokens for Humanity — an organization developing blockchain applications for the charity sector — told Cointelegraph that the majority of cryptocurrency holders and users are between the ages of 18 to 35, a demographic which is difficult for many charities to engage with.
Thomas said blockchain integration “solves the problem” of donor engagement with younger demographics.
He also noted that there has been a “resurgence” of interest in tracking and reporting the impact of nonprofits and that blockchain technology would enable a clearer way for transparency and accountability.
UNICEF’s Whitnall said its current focus with blockchain technology is improving its efficiency in distributing resources globally, as well as making its internal operations more efficient and transparent to the wider community.
Cryptocurrency has been a popular means of giving to charitable causes. Ether was the most-donated cryptocurrency in 2021, totaling $30.79 million in donation volume via The Giving Block.
This year, crypto donations has most notably been a major lifeline for Ukraine’s defense against Russia, with the Ukrainian government spending $54M of crypto donations on military equipment, hardware, and munitions, among other defense equipment.
Only a month after payments giant Visa announced a partnership with FTX to roll out a debit card program in 40 countries worldwide, Visa abruptly ended the program due to FTX‘s recent insolvency and bankruptcy issues.
FTX’s liquidity issues were triggered last week when Binance CEO Changpeng “CZ” Zhao announced that Binance would liquidate the entirety of its FTX Token (FTT) holdings, which inadvertently led to a bank run that brought on FTX liquidity issues.
In October, when the news of FTX and Visa’s partnership circulated online, the native cryptocurrency of the FTX trading platform, FTT, spiked by about 7%, reaching a high of $25.62. After the recent turn of events, FTT is currently trading at $1.89.
Things have quickly spiraled for the once reputable cryptocurrency exchange FTX, and it comes as no surprise that companies like Visa are working to distance themselves from the disgraced platform.
“The situation with FTX is unfortunate and we are monitoring developments closely. In all our undertakings—in digital currency and beyond—our focus on security and trust remains paramount. We have terminated our global agreements with FTX and their US debit card program is being wound down by their issuer,” a Visa spokesperson told Cointelegraph.
Visa is not the only company severing ties with FTX. On Nov 11, Cointelegraph shared that The Securities and Exchange Commission of Cyprus, or CySEC, reportedly issued a statement amid FTX’s filing for Chapter 11 bankruptcy in the United States requesting the exchange halt operations for its Europe arm.
In another instance, Plaid, the fintech company which facilitates communication between financial services apps, and users’ banks and credit card providers, suspended FTX US access to its products, citing “concerning public reports” of fraudulent activity.
This Daily Dose was brought to you by Cointelegraph.