JPMorgan Chase Publishes Research On Crypto Usage

American multinational investment bank and financial services holding firm JPMorgan Chase has published the results of a research project it has engaged in. The report highlights how trends have emerged in the demographic they sampled, reflecting a shift in preferences among U.S. crypto users.

The report, titled "The Dynamics and Demographics of U.S. Household Crypto-Asset Use" was co-authored by the company's President, Chris Wheat, and George Eckerd, the firm's Financial Markets Research Lead. According to the authors, their methodology went through "de-identified data covering a sample of nearly 5 million active checking account customers, over 600 thousand of which have conducted transfers to crypto accounts."

The research details how most crypto users based or registered from the U.S. increasingly made first-time transactions during the height of crypto-asset price surges. The report also points to how crypto usage is skewed towards "men, Asian individuals, and younger individuals with higher incomes."

The report also found that holdings for each wallet tend to be "relatively small" given how median flows are equal to less than a week's worth of earnings. However, this is counteracted by the results that show how roughly 15% of users have net transfers that are over the average monthly income per individual. This points to how cryptocurrencies have become increasingly popular among U.S. households, but their use has been relatively small in comparison to other investing options such as stocks and bonds.

Despite this relative lack of exposure, a small subset of crypto users may have financial risk if the crypto market declines further. About 15 percent of crypto users have transferred over one month's worth of take-home pay into crypto accounts, making them more vulnerable to future price drops, compared than non-crypto investors; this percentage increases as the price of cryptocurrencies drops.

The trend also points to how most of these holders transferred crypto when prices "were significantly higher than recent levels" while the lower-income bracket of the demographic often made purchases at higher levels, compared to holders who had access to more income.

When the price of a security rises quickly, households typically react by transferring money into that asset. The researchers from JPMorganChase thus concluded that this implies that the "timing" of these transfers is characteristic of "herd behavior". To add, the researchers note that American households tended to make large investments in cryptocurrencies during the period when their value was rising sharply.

Using data on the time of transfers to cryptocurrency accounts as a proxy for investment price, JPMorgan Chase's research found that households with lower incomes tended to purchase cryptoassets at substantially higher prices than other groups. According to the financial firm, this would also mean that at the rates that cryptocurrencies were trading at in late-2022, the majority of U.S. households would have been losing money overall if they had owned any cryptocurrency for more than a few months.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.