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(Kitco News) – The crypto community is swarmed with pundits and ideologues singing the praises of cryptocurrency as a smart way to hedge against inflation, or a reasoned way to get out of corrupt financial systems, or a prudent way to protect yourself. against global crises.

A recent study by the Bank for International Settlements (BIS) shows that these arguments are like a casino buffet: a nice bonus if it’s there, and a handy way to justify the whole exercise, but not which brings people through the door.

In a work document Titled “Crypto Trading and Bitcoin Price: Evidence from a New Retail Adoption Database,” authors Sebastian Doerr, Jon Frost, Raphael Auer, Giulio Cornelli, and Leonardo Gambacorta, have constructed a large data set on the retail investors’ daily use of crypto exchange apps across 95 countries from 2015 to 2022.

The authors show that there is one overwhelming factor driving people to download crypto apps and buy Bitcoin: price increases.

“First, we show that a rise in the price of Bitcoin is associated with a significant increase in the number of new users, i.e. the entry of new investors,” they write, adding that the positive correlation between newsworthy price increases are strong even when controlling for other factors such as “general financial market conditions, uncertainty or country characteristics”.

Perhaps most tellingly, they write that “Bitcoin price remains the most important factor when controlling for global uncertainty or volatility, contradicting explanations based on Bitcoin as a safe haven.” Even controlling for differences in quality and trust in institutions or levels of economic development, a single price increase “still has an economically and statistically significant effect on the number of new users and explains the lion’s share of the variation.” the entry of new users.”

The study also makes it very clear that the “crypto-bro” stereotype is well deserved. “By far the largest group of users – almost 40% – were men under the age of 35,” they write. “Men between the ages of 35 and 54 accounted for an additional 25% on average.” This means that over 65% of people on platforms like Binance, Coinbase, and (shudder) FTX are male and young.

What makes this demographic group special in the world of finance? Is it their prudent spending decisions? Their passion for careful planning? Perhaps it is their deep understanding of macroeconomic and historical factors that impact financial markets? A propensity for due diligence, perhaps?

If you said risk appetite, you’re right. Males under the age of 35 are “the most risk-seeking segment of the population” and are “more sensitive to Bitcoin price changes than female users and older males.”

Crypto platform adoption and bitcoin investing is a young man’s game. “Less than 35% of all users globally are female, and the majority of female crypto app users are under 35,” they write.

When the authors correlated the timing of downloads and purchases with the demographics that were downloading and purchasing, the conclusion was clear: “Taken together, these patterns are consistent with the speculative motive caused by feedback trading considerations, that is- that is, users are drawn to Bitcoin by rising prices — rather than an aversion to traditional banks, a search for a store of value, or distrust of public institutions.

But hey, this demo can answer, so what? So we young men get into crypto when crypto is doing well…why does it matter? Well, as most older men (and almost all women) will be happy to tell them, jumping on the bandwagon and buying big is a lousy investment. The young males are led like lambs to the slaughterhouse. Or like whale krill.

The authors write that their findings “support the idea that, overall, investors view cryptocurrencies as a speculative investment (a ‘bet’) rather than a means of payment for actual economic transactions.” They also pose a question that, in a post-Luna, post-Venture, post-FTX world, has found its answer: “if users are primarily driven by retrospective price movements, are they fully prepared for the potential consequences of ‘a correction price?’

“Our estimates that 73-81% of global investors have likely lost money on their crypto investment, and that large (‘hunchback’) investors have tended to sell when small investors are buying, may justify a further investigation into claims that crypto is ‘democratizing’ the financial system,” they conclude.

Well, if nearly everyone who voted with their wallet is sharing massive losses on their crypto “investments,” that’s kind of a democracy, isn’t it?

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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