Still Hope For Crypto?! This Will REALLY Surprise You!!

Over the last few months, we’ve seen many cryptocurrency exchanges release reports about the current state of the crypto market and what comes next. Bitstamp recently released a crypto report of its own which included thousands of individual and institutional investors, making it one of the most comprehensive crypto reports to date. Today I’m going to give you a bit of background about Bitstamp’s crypto report and tell you what it says about the crypto market and what it all means for the future of cryptocurrency.

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About Bitstamp’s Crypto Report

As I mentioned in the introduction, I want to start with a bit of background about Bitstamp’s crypto report. This is because Bitstamp isn’t exactly your average cryptocurrency exchange.

For starters, Bitstamp was founded by two bitcoin OGs in 2011. Its operations were limited to Europe and the UK until fairly recently. As far as I can tell, Bitstamp was one of the first, if not the first, cryptocurrency exchanges to implement KYC way back in 2013. This made it particularly attractive to institutional investors in the region.

Bitstamp’s commitment to following regulations seems to have put it in direct competition with the Gemini cryptocurrency exchange in the United States, which has ‘the mentality and ethos of asking for permission, not forgiveness from regulators.’

As a case in point, Bitstamp managed to poach one of Gemini’s top executives in 2020 to become Bitstamp’s new CEO. In 2021, Bitstamp also hired other top executives from Barclays Bank and Amazon to fill its COO and CFO seats, respectively. After announcing its expansion into the United States last May, Bitstamp managed to get its hands on Kraken’s CEO to become the CEO of Bitstamp. Kraken is another top crypto exchange.

By the way, earlier this year the CEO of Bitstamp USA stated that the exchange was exploring offering stock and NFT trading, which would put it in direct competition with FTX USA as it’s also looking to offer stock trading.

As far as I can tell, Bitstamp’s recent crypto report is a continuation of the exchange’s hyper-competitive behavior. That’s because Gemini recently released its own incredibly comprehensive crypto report. What’s interesting is that Gemini’s crypto report was the first of its kind. This is also the case with the Bitstamps crypto report. In other words, they’re the first of many comprehensive crypto reports to come from both exchanges. This is significant because the competition between Bitstamp, Gemini, and other crypto exchanges means the quality of these crypto reports is likely to increase substantially as time goes on.

Bitstamp has definitely raised the bar with its recent report. That’s because not only did it include 23 000 individual investors in 23 countries, but also because the survey included five and a half thousand institutions. The report is titled ‘Bitstamp Crypto Pulse: crypto to overtake traditional investments’, and this barely scratches the surface of all the cool stuff the authors found. 

Foreword And Introduction

The Bitstamp’s crypto report begins with a brief forward by Bitstamp CEO Julian Sawyer, who makes a very good point, and that’s that we must stop referring to DeFi NFTs, stablecoin, and other crypto niches as just crypto because each one comes with its own unique risks, benefits, and characteristics. Julian goes on to say that, the key to crypto adoption is trust, and although regulations do increase trust among some investors, they’re not enough because ‘we need to create trust in the assets themselves’.

Julian therefore proposes creating crypto-specific ratings agencies for different assets and crypto companies and argues that this is the key to making crypto bigger than the traditional financial system. He stops short of saying that Bitstamp itself will seek to offer crypto rating services, but something tells me that this is now on its roadmap. This, of course, begs the question of how objective these crypto rating agencies will be, but I suppose that’s a bridge we’ll have to cross when we come to it.

The next page offers a brief introduction to the report and repeats that it used data from over a thousand individual and institutional investors as part of its analysis. The authors specify that the purpose of the report is to assess how much investors trust cryptocurrency, and this is again because trust is the key to adoption.

The authors also put Bitstamp’s competitive spirit on full display by noting ‘the survey was conducted in March 2022, making it the most up-to-date relevant survey in the world’. I interpret this as a not so subtle dig at Gemini’s crypto report, the data for which was collected between November 2021 and February this year.

The ironic thing is that Gemini’s methodology was arguably more thorough as its data collection took place while the crypto market was crashing. By contrast, the crypto market was looking like it was on the road to recovery in March, which might have influenced the answers of some of Bitstamp’s survey participants. So keep that in mind as we go along.

The Survey Participants

Anyway, the first part of Bitstamps’s crypto report gives a detailed breakdown of the parties that took part in the survey. The authors explain that ‘we surveyed only those retail investors who had heard of cryptocurrency before, even if they knew very little’, meaning they didn’t survey any retail investors who already hold cryptocurrency. This is in stark contrast to most crypto studies, which typically include only retail investors who hold cryptocurrency. This is usually a consequence of the sample. The entity conducting the survey has access to an exchange that surveys its users, for example. Most of them probably hold crypto.

It seems to be a different story for institutional investors, however, as the authors note that, ‘we spoke to investment professionals who own or control the cryptocurrency strategy for their companies and for their clients’. This suggests they surveyed institutional investors who already hold cryptocurrency. Though this isn’t entirely clear.

Given this cohort, it’s no surprise that the male to female split for retail investors was about 50/50 because that’s consistent with the general breakdown of gender in most countries.

The same goes for institutional investors. On the institutional side, nearly 30% work in investment banking, and nearly half of the participants are c-suite, which includes CEOs, CFOs, and COs.

Knowledge And Trust Of Crypto

So the second part of Bitstamp’s crypto report examines the knowledge and trust levels retail and institutional investors have when it comes to crypto, and they seem to be evenly matched. Regarding knowledge, around 82% of retail investors consider themselves to be very knowledgeable about crypto, whereas 77% of institutional investors consider themselves to be very knowledgeable about crypto. In terms of trust, 67% of retail investors trust crypto, whereas around 70% of institutional investors trust crypto. All things considered, this is pretty damn high.

The authors conclude that having lots of knowledge about cryptography correlates with trusting cryptography even though this relationship isn’t all that apparent based on the data I just mentioned. The authors elaborate by explaining that the knowledge and trust relationship are most apparent in developing countries, where people don’t have access to traditional financial services. Not having access to traditional financial services results in more knowledge about alternatives such as cryptocurrency, which translates to more trust in the technology. This makes perfect sense and is consistent with the findings from Gemini’s crypto report as well as many other crypto reports. As you can see, the country with the highest level of trust in cryptocurrency is none other than Nigeria.

A recent crypto report by the KuCoin cryptocurrency exchange found that this was mainly because of the lack of access to traditional financial services in the country. Conversely, the country with the lowest level of trust in crypto is France, which explains why crypto didn’t play a major role in France’s recent elections and why the French don’t seem to be worried about the fact that their re-elected president is a huge fan of Central Bank digital currencies.

Differences By Country

Anyhow, the authors then examine the different levels of knowledge and trust in cryptocurrencies for retail and institutional investors by country. This is where the correlations between the two become abundantly clear, starting with institutional knowledge of cryptocurrency. About half of respondents in most countries say they know little or nothing about cryptocurrency. Surprisingly, almost no institutional investors in the UAE and the UK stated that they know very little about cryptocurrency, implying that they know a lot about it.

It looks like institutional investors in most countries are somewhat knowledgeable or very knowledgeable about cryptocurrency, with the only outlier being France. It’s a similar story when it comes to retail knowledge of cryptocurrency, with about 50% of retail investors in most countries saying they don’t know much about it. Interestingly, a lot fewer than 25% of retail investors in Japan and the United States know very little about cryptocurrency, which again means they know a lot about crypto.

It looks like most retail investors know a lot about cryptocurrency regardless of the country, with the only outlier again being France. More about the French in a moment.

The next topic the Bitstamp report tackles is the perception of crypto regulation among retail and institutional investors, and the authors break down crypto regulation into three categories: regular cryptocurrencies, stable coins, and NFTs. I must admit that I was a bit shocked to see that roughly 50% of both retail and institutional investors think cryptos, sable coins, and NFTs are regulated. I don’t know about you, but I have yet to hear of any comprehensive regulations about any of these niches in most countries.

This might have something to do with the fact that knowledge of cryptocurrency doesn’t seem to correlate to knowledge of cryptocurrency regulation, at least from the national vantage point.

The authors then pivot to analyzing the top barriers to investing in cryptocurrency for institutional investors and retail investors and I can’t say I’m all that surprised by the results. Institutional investors are intimidated by the high risk and high volatility of most cryptocurrencies and are also concerned about the lack of regulation of the crypto industry. Notice how institutional investors in France say they don’t invest because crypto is ‘too new’.

While retail investors are likewise intimidated by the risks associated with cryptocurrency. Their number one barrier to entry is that they don’t know enough to get started and the French flag is in full view on that factor. I guess that explains it then.

How Crypto Is Or Would Be Used

Anyhow, the third part of Bitstamp’s crypto report covers how crypto is being used by crypto holders or would be used by would-be crypto holders. The authors start by saying that most institutional investors are starting to recommend crypto to their clients, with 72% saying that they plan on increasing their exposure to crypto over the next five years. Meanwhile, many retail investors have expanded their use of crypto beyond speculative investing, with roughly the same percentage saying they want to increase their crypto allocations.

Funnily enough, the authors include buying a crypto with another crypto as something that’s unrelated to trading with I believe these types of transactions are related to decentralized exchanges and the like, but this is not entirely clear.

In second place, we have crypto transfers to other individuals at around 42%, followed by participating in loyalty rewards programs at around 31%, staking at around 31% and blockchain gaming at almost 29%. The authors also note that almost 60% of retail investors started investing in crypto over the last two years, something that is again consistent with the findings of other crypto reports as well as a poll I recently ran on Twitter. Almost 40% of institutional investors started investing in crypto over the last two years as well.

When it comes to what else respondents are doing with crypto or could see themselves doing with it, 50% said that shopping online, buying groceries, eating out, buying a car, and donating to charity are all on the table. I’m a bit skeptical about that.

The authors also note that 80% of retail respondents and over 70% of institutional respondents believe crypto will go mainstream in the next 10 years, though I would say this is already happening. I guess that puts me in the bucket of respondents who say that crypto is already mainstream, which includes 14% of retail investors and almost 12% of institutional investors.

Regional Differences

The fourth part of Bitstamp’s crypto report zooms in on the regional differences in crypto knowledge and trust. Here the authors reveal that their participant pool included 6,000 retail investors and over 1, 000 institutional investors in the UK and EU and reiterate that most investors in that region are at the lower end of the curve in terms of crypto knowledge and trust.

Interestingly, there seems to be a gap in crypto trust between institutional and retail investors in most countries that make up the region, though both sit close to 50% as far as the authors are concerned.

The solution in this case is crypto education as well as reasonable crypto regulations, but given the headlines we’ve seen coming out of Europe about crypto regulation these days, I’m starting to become skeptical as to whether such a thing as reasonable regulation can be achieved there. Next, the authors revealed their participant pool included over 5000 retail investors and over 1200 institutional investors in Latin America, Africa, and the Middle East, which is an admittedly small sample size given the size of these regions. It was a large enough sample to show that trust in crypto is extremely high in these regions, with approximately 75% of institutional and retail investors in most countries saying they trust crypto.

It might have something to do with the fact that institutional and retail investors in those regions also have incredibly high levels of crypto knowledge, close to 80% on both fronts, to be exact.

I couldn’t help but notice that the country with the highest level of crypto knowledge in these regions is Argentina. This would explain why the IMF made the deterrence of crypto adoption a part of its loan agreement with the country in March. It also supports my theory that Argentina will be one of the next countries to adopt bitcoin as legal tender.

The authors then moved the spotlight back to the report. The authors then moved the spotlight to North America, where they revealed that their participant pool included over 2 000 retail investors and over 500 institutional investors from Canada and the United States. As you can see, the level of trust in crypto by individuals and institutions in Canada and the United States is about the same at around 60%, which is only slightly above the average trust in crypto from their cousin countries in the UK and EU.

This is again reflected in the slightly higher levels of knowledge of cryptocurrency for retail and institutional investors in the region, at around 62% and 66%, respectively. Finally, the authors turn to countries in the Asia-Pacific region, where they managed to tap over 1200 institutional investors and over 5000 retail investors as part of their study.

As far as I understand, the trust in cryptocurrency in this region is much more scattered for both institutional and retail investors, with Japan being on the low end and India being on the high end in both cases.

What’s strange is that the trust level seems to be lagging behind the levels of knowledge of cryptocurrency in the region, which are comparable to those of Latin America, Africa, and the Middle East. As far as I understand, the authors attribute this discrepancy to the more conservative cultures of countries in Asia Pacific.

The Future Of Cryptocurrency

Bitstamp’s crypto report concludes with a short section about the future of cryptocurrency, which is, of course, mainstream adoption. As the authors point out, ‘knowledge is the key barrier holding back mainstream adoption’. Naturally, the authors paint Bitstamp as the crypto company that’s championing the cause of crypto education and detail three ways in which the exchange will achieve its educational aims.

First, it will continue to publish these kinds of comprehensive cryptographic reports to keep the crypto world informed as to the progress of crypto knowledge, trust, and adoption, or lack thereof. Second, it will work directly with retail and institutional investors to make sure they have the right knowledge when it comes to cryptocurrency. Third, it will bring other crypto companies and exchanges together to create a global perspective on regulations through collaboration with authorities and establish the kinds of crypto ratings agencies I was talking about earlier with the goal of achieving sound governance.

This reminds me of something that I discovered while doing research about cryptocurrency and ESG, which is that institutions seem more concerned about the fact that they can’t control cryptocurrencies like bitcoin the way they can control companies on issues of an environmental nature. In any case, there’s no question that Bitstamp’s observation of knowledge driving trust and adoption by extension is accurate. The correlations are as clear as day.

The real question, then, is what causes retail investors and institutional investors to want to learn about cryptocurrency in the first place. The absence of financial services seems to be one factor, but obviously this is a factor that’s only present in select countries and it’s not exactly one that you’d want to impose on investors so that they can learn about cryptocurrency speculation. That’s certainly the driving factor behind the desire to learn about cryptocurrency in many developed countries. As we’ve seen in countries such as France, speculation isn’t always enough to encourage investors to learn about cryptocurrencies. Speculation is also not a very big factor when the crypto market is crashing. If anything, it seems to significantly dampen the desire to learn about crypto. This leaves one last factor, and that’s well for fun. Remember that nearly 30% of crypto investors report using cryptocurrency in some form of blockchain game. This suggests that a third factor driving the desire to learn about cryptocurrency is stuff that’s not necessarily related to finance at all. This seems to be the case.

The NFT and metaverse niches have arguably been the biggest drivers of interest in cryptocurrency over the last year, and that applies to individuals and institutions regardless of their investor status. This is a big part of why I’m so bullish on NFTs. In the metaverse and especially in blockchain gaming.

That’s all for the Bitstamps crypto report.

[This article is a transcription of a video made by Coin Bureau]

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