A new report from the Bank for International Settlements (BIS) suggests that investors in bitcoin (BTC) are more attracted by the increase in prices of the cryptocurrency than by their aversion to banks or its use as a store of value.
In a “BIS Working Papers” report published on November 14, The central bank body analyzed the relationship between bitcoin prices, cryptocurrency trading and retail adoption.
It studied the factors driving retail investor adoption of cryptocurrency using cryptocurrency trading app downloads as a proxy for user adoption and investment at the time of download.
He discovered that “a rise in the price of bitcoin is associated with a significant increase in new users, that is, the entry of new investors” and that most retail investors “downloaded cryptocurrency applications when prices were high”.
The BIS presented evidence that Crypto exchange daily app downloads increased with the rapid rise of the bitcoin price between July and November 2021, peaking when the bitcoin price was between $55,000 and $60,000about a month before its November 2021 all-time high of just over $69,000.
He added that 40% of cryptocurrency app users were men under the age of 35 and were part of the most “risk-seeking” segment of the populationfrom which it follows:
“The users [están] being drawn to bitcoin by rising prices, rather than an aversion to traditional banks, a search for a store of value, or a mistrust of public institutions.”
“The bitcoin price remains the most important factor when controlling for uncertainty or global volatility, which contradicts bitcoin-is-a-safe-haven explanations,” he added..
The BIS assumed that app users bought bitcoin at the time of downloading a crypto app and later assumed that up to “81% of users would have lost money” if they had bought bitcoin above $20,000..
The BIS assumptions appear to correlate with data from blockchain analytics firm Glassnode, which on Nov. 14 confirmed that just over half of bitcoin addresses are in gains, hitting their lowest level in two years.
#Bitcoin $BTC Percent Addresses in Profit (7d MA) just reached a 2-year low of 51.881%
View metric: https://t.co/ik5IkrdoPk pic.twitter.com/boVDTqG8YL
— glassnode alerts (@glassnodealerts) November 14, 2022
The percentage of bitcoin addresses in Profit (7d MA) just hit a 2-year low of 51.881%. See the metric here: https://t.co/ik5IkrdoPk pic.twitter.com/boVDTqG8YL
The BIS added that its analysis of the blockchain data found that as bitcoin prices rose, smaller users bought and “larger holders (so-called ‘whales’ or ‘humpbacks’) sold, earning a return at the expense of smaller users”.
He also documented the geography of cryptocurrency app adoption and found that Between August 2015 and 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 only got 1,000 cryptocurrency app downloads per 100,000 people, and the BIS believes that increased legal restrictions on cryptocurrencies hinder adoption by retailers in those countries.
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