JPMorgan’s US crypto research suggests herd-like behavior

JPMorgan Chase & Co has released new findings showing US household crypto usage dynamics. Findings from the research indicate a herd-like mentality by digital asset investors, of which a majority are male millennials.

JPMorgan Chase & Co is an American global investment bank and financial services provider with its headquarters in New York City and incorporated in Delaware.

Herd behavior is an individual’s phenomenon whereby they follow or imitate a group instead of choosing independently.

Findings by JPMorgan on crypto use in US households

The research centered on the demographics and dynamics of digital asset use within US households, and it narrowed down to four general findings.

Digital asset use within homes rose across the board during the Covid-19 pandemic period. A time when most people’s lives were affected both economically and socially.

By June 2022, 15% of Americans had conducted transfers into digital asset accounts. The investments directly impacted the household’s balance sheets, noting the digital asset market’s high volatility and uncertainty within the industry.

The research used a sample of 5 million users with active checking accounts that conducted transfers into digital asset accounts. 

Most users purchased digital assets when there was a spike in digital asset prices. These correlated with the bull runs of 2021, particularly Bitcoin.

The target group consisted of accounts with a total net flow of $1,000 per month with a minimum of 5 transactions. The big assumption made was that the users purchased Bitcoin once they transferred funds into digital asset accounts.

The intensity of transfer activity at certain points in time, correlated with price movements, suggests herd-like behavior driving a notable share of individuals’ overall transactions with crypto accounts.

JPMorgan research finding

When Bitcoin’s price began dropping in May 2022, net inflows and outflows balanced.

Usage demographics revealed that young men of Asian origin with a high income had the most increased appetite for digital assets.

Bank transaction data showed similar demographic results to surveys.

The median total gross invested into digital assets was $1,000 for men and $400 for women. Among the millennials sampled, Asians led the curve at 27%, Black and Hispanic individuals at 21%, and whites at 20%.

Most US residents have minimal digital asset holdings worth about a week of take-home pay. The median gross amount sent to digital asset accounts from 2015 to the first half of 2022 was approximately $620.

Higher-earning individuals averaged higher transfers into digital assets. 

Finally, most residents bought digital assets when it was priced significantly higher. 

Residents with higher incomes purchased digital assets at a lower price than those with low incomes. The typical individual bought digital assets when Bitcoin was trading at $43,900. $45,400 for high earners and $42,400 for low earners.

The median purchase price for residents without a college degree was $44,500, a college degree was $43,700, and a graduate degree was $42,800.

With Bitcoin trading at a market price of $17,590 at press time, it implies that most US households that bought digital assets are at a loss. 

Final thoughts:

The crypto winter has negatively impacted most US households that bought digital assets. Millennials have had an uptick in crypto, a behavior that might flow over to younger generations.

The sharp drop in digital asset prices and the collapse of reputable platforms like FTX have resulted in a general negative sentiment toward the industry. On-chain stats indicate rising withdrawals from exchanges as users diversify into other forms of investment to manage risk.

Blockchain applications outside digital assets are, however, growing by the day. Governments are exploring national digital currencies while firms like JP Morgan experiment with global transactions using the technology.