Cryptocurrencies have picked up considerable steam over the past few years. People all over the world are jumping on the crypto train in some way or fashion and trying to wrap their heads around what is happening in this complex – but exciting – sector.
Cryptocurrency has rapidly become part of the mainstream global financial system and is seemingly poised to become the future of digital money. As of October 22, 2022, according to CoinMarketCap, there were over 20,000 cryptocurrencies, with bitcoin and ether accounting for almost 60% of total crypto market value.1 Crypto has also now become a nearly $1 trillion market, according to Triple A.2
With all that momentum, why have the crypto headlines shifted recently to focus on a “crypto winter?” Much of the mainstream news on the “crypto winter” has revolved around exchanges and companies in the crypto space collapsing due to hyper-leveraged positions. This led to drops in cryptocurrency prices. Overall, total crypto capitalization dropped by $500 billion in the first half of 2022, according to Business Insider.3 The value of bitcoin alone decreased by more than 50%, primarily caused by reverberating effects of the crash of stablecoins Terra and Luna.4 However, the positive result of these collapses is the emergence of new precautions for companies involved in crypto, aimed at preventing repeat mistakes.
And that isn’t where the story ends. Data shows that billions of dollars in bitcoin is traded daily. Moreover, trading has maintained significant levels.5 Many large financial institutions like JPMorgan and Goldman Sachs have entered the crypto arena by offering some form of crypto access, trading, and/or research.6
Together, this all signals that individuals and investors remain interested and active in crypto, and bullish on its future potential overall.
So, who is buying crypto?
Common perception is that early adopters of crypto are young, tech-savvy millennials. While a Morning Consult study shows that purchasers of cryptocurrency do skew younger overall, ownership is scattered across various age groups. About 29% of millennials and about 23% of Gen Z participants surveyed in October 2022 said they own bitcoin.7 This is an important consideration for financial institutions, as younger generations are more likely to utilize nonbank solutions that offer more advanced technology and faster, easier processes, according to Fiserv research.8 Offering a crypto solution may be a way to attract this demographic.
Bakkt's Loyalty and Rewards 2022 Outlook Study found that crypto owners tend to have higher household incomes than non-crypto owners. The same research also shows that these buyers skew toward a younger demographic in the 25-44 age range, and that the majority are male.9
Although U.S. crypto ownership spans the generations, crypto ownership still has not become widespread. According to the Morning Consult study, only about 19% of people in the U.S. are crypto owners and 25% of them have a median household income of $100K, reflecting a more affluent customer.
So, where is crypto adoption headed in the foreseeable future?
The future of crypto: Growing acceptance and adoption
Trends show that there's enduring – and growing – interest in digital assets. Data from a study conducted by Morning Consult shows that 1 in 4 consumers said that they intended to purchase crypto in the next month. The share of those who planned to purchase bitcoin, specifically, was nearly identical.10
It’s also important to remember that cryptocurrency is a new technology, which will follow a general adoption curve. Think about the rise of the internet in the 1990s; the early adopters were “techies,” but the internet quickly became mainstream and has grown to a point of ubiquity today. Crypto is following the same adoption curve as the rise of the internet, according to a Cryptoslate article11 (see chart below). If it continues to follow the same trajectory, the article estimates there will be approximately 1 billion crypto users by 2027.
Source: Cryptoslate, “Internet vs Crypto Adoption Chart Predicts 1 Billion Users by 2027”
Quantifiable correlations like the above support the idea that crypto is nowhere near over, and that the current “crypto winter” will be a shorter and less permanent season than some may think.
Another consideration is the global regulatory ramp up surrounding crypto. While it’s popular to see crypto referred to as the “Wild West” of the financial world, increased regulatory scrutiny could help boost crypto adoption. Regulations like those currently proposed in the U.S. and Europe’s recently passed Markets in Crypto Assets (MiCA) may increase consumer confidence in crypto.
Conclusion: The time is now
As the rapid rate of crypto growth is fueling adoption in many different ways, banks and credit unions have an opportunity to strike while the iron is hot and meet their customers where they want to be. Data shows that consumers would feel confident in their bank as a crypto facilitator. According to a June 2022 study by Bakkt, 70% of respondents said they’re likely to buy crypto through their primary bank, and 76% rated their primary banks as more trustworthy for buying crypto than a crypto exchange.12
With that in mind, there’s still time to be an early entrant into the market and to show innovation. The Fiserv partnership with Bakkt provides a way for financial institutions to offer crypto buy/sell/hold technology. Bakkt® Crypto Connect is among the crypto options available in AppMarket from Fiserv and is integrated with Fiserv digital banking, creating an easy, secure, and customer-friendly way for financial institutions to get involved in this budding asset class.
A future integration of Bakkt into the Carat omnichannel ecosystem from Fiserv will allow businesses to pursue new options for B2B and B2C payouts, loyalty programs and transactions, all with crypto assets accessible via a digital asset wallet. Merchants will be able to deliver innovative consumer experiences through a simple integration to Carat and roll out new digital asset offerings that are right for their brand and customers.
Cryptocurrencies are in a time of rapid adoption. Despite recent volatility, consumer interest in and involvement with crypto is poised to grow. Financial institutions have an opportunity to further engage accountholders (especially younger customers or members) by offering crypto adoption.
1. CoinMarketCap. Access November 3, 2022, 2. Triple A. “Global crypto adoption.” Access November 3, 2022, 3. Business Insider. “Crypto Market has Plunged 28% Over the Last Week to $1.2 Trillion” May 12, 2022, 4. CNBC. “Cryptocurrency Luna Crashes to $0 as UST Falls Further From Dollar Peg” May 13, 2022, 5. Statista.com. “Overall Cryptocurrency 24 Hour Trade Volume from July 1, 2020 to August 18, 2022”, 6. Banklesstimes. 76% of Global Financial Institutions Plan on Using Crypto in the Next Three Years September 27, 2022, 7. Morning Consult Study. "Tracking Cryptocurrency Adoption and Perspectives” November 1, 2022, 8. Fiserv Expectations & Experiences, Fintech Adoption research, 2021, 9. Bakkt “Bakkt Loyalty and Rewards Study” February 2022, 10. Morning Consult “The State of Consumer Banking and Payments” H2 2022, 11. Cryptoslate, “Internet vs Crypto Adoption Chart Predicts 1 Billion Users by 2027” December 2021, 12. Bakkt Crypto Connect Research Exploration June 2022