Finance

Consumers May Hibernate for ‘Crypto Winter,’ but They Aren’t Giving Up — Here’s What It Means for Brands

Morning Consult financial services analyst Charlotte Principato details how consumers are reacting to current cryptocurrency market volatility and their expectations for the future

Graphic conveying cryptocurrency and financial services trends
Getty Images / Morning Consult artwork by Tadi Martinez

Even amid bitcoin’s recent price drop below $20,000, consumers have remained committed to the asset and to cryptocurrency more broadly. But they aren’t naive; they know a crypto winter is coming. Crypto brands serving consumers should expect lower transaction volumes, a shift toward cold storage of assets and growing favorability toward more regulation.

Headlines about institutional investors’ liquidating their positions and asset prices tanking may scare the regular retail investor, but once again, crypto owners are proving to be a different kind of risk taker. Instead of shedding assets, U.S. cryptocurrency owners are buckling down and preparing to hibernate for a crypto winter, according to respondents of a Morning Consult survey that fielded as bitcoin’s price dipped below $20,000 on June 18. The shares of U.S. consumers who own any cryptocurrency and those who own bitcoin specifically stayed steady from May to June (and throughout 2022), and purchasing consideration among both groups did not significantly change either. 

But crypto brands, many of which have acted quickly to pare down staff in expectation of a recession and lessened crypto demand, are right to predict a pullback from consumers. Crypto owners are not exiting the market entirely, but they are dimming their outlook on bitcoin, planning lower transaction volumes and moving their assets to cold storage, all of which hurts exchanges and platforms that rely on transaction and activity fees. 

According to consumers, Bitcoin is not dead: As of mid-June, 19% of U.S. adults report owning some form of cryptocurrency, and 14% report owning bitcoin specifically, both equal to the shares who said the same in January. Brands should be heartened that U.S. consumers have not abandoned cryptocurrency over six months of bad headlines about spiraling bitcoin value, record-high crypto hacks, unstable stablecoins and crypto lenders not allowing customers access to their funds.

But consumers are not burying their heads in the sand; they know it will take some time for bitcoin’s price to recover from its current low, and the six-month price predictions for bitcoin among cryptocurrency owners softened significantly from May to June. 

Respondents were asked to predict the price of bitcoin in six months

Survey conducted monthly among a representative sample of roughly 4,400 U.S. adults, with an unweighted margin of error of +/-1 percentage point.

They’re also second-guessing crypto exchanges and platforms. Trust in big-name brands like Coinbase, Binance and FTX is dropping across the board. These companies are too young to have established long-term relationships with consumers (or stores of goodwill) and have yet to sufficiently differentiate themselves from one another. As a result, bad news afflicting one affects all. In addition, consumers project their lack of trust in cryptocurrency on crypto brands — and trust in cryptocurrency, as we’ve written about before, is already dropping among the general population.

Share of U.S. adults who trust each of the following brands to do what is right, among those aware of the brand:

Morning Consult Brand Intelligence
In the near term, brands should expect muted transaction activity and stronger consumer desire for regulation

From a transaction volume standpoint, the share of bitcoin owners who reported purchasing the cryptocurrency in the past month is down 6 percentage points from February (28% in June versus 34% in February), and future intention to purchase bitcoin among bitcoin owners has waned from 76% in February to 71% in June. Furthermore, both reported and predicted sales of bitcoin are up slightly as some owners plan to reduce their exposure amid the macroeconomic uncertainty: 37% of bitcoin owners report selling some bitcoin in the past month, and 36% plan to sell some in the next month.

Bitcoin owners’ reported and predicted purchases and sales of bitcoin

Survey conducted monthly among a representative sample of roughly 4,400 U.S. adults, with an unweighted margin of error of +/-1 percentage point.

Although currently modest, this softened transaction behavior could intensify if inflation and interest rate hikes continue to put downward pressure on bitcoin’s price and tap consumers’ dwindling discretionary income (leaving them unable to “buy the dip”). 

Many crypto owners may already be closing up their trading shops for the crypto winter: Their reported usage of cold wallets for cryptocurrency has risen 8 points since January, from 24% to 32%. Cold wallets — offline storage of cryptocurrency on a device such as a hard drive or thumb drive — are considered by many to be the safest way to store cryptocurrency, but it cannot be traded as easily as when it’s stored on an exchange or in a digital wallet. So the more consumers use cold wallets, the lower transaction volumes will be, and thus brands’ revenue from transaction fees will suffer. 

Finally, the events of the last several months will likely continue to warm consumers toward more regulation of cryptocurrency and the industry surrounding it. Compared with January, more consumers now want to see cryptocurrency regulated either similarly to or more than traditional financial assets (48% in June versus 42% in January). While increased regulation could range from just a documentation headache to a strategic nightmare, the flip side is that, depending on how it’s handled by the crypto brand, it could also create increased trust in the industry and spur consumers back to higher trading frequency. 

The monetary value of cryptocurrencies remains as uncertain as ever, but if anything, the events of the first half of 2022 prove that consumers’ attachment is not: Crypto owners are still in it for the long term, and while brands should expect the pain of lower transaction volume for now, it won’t last forever.

Morning Consult