Cryptocurrency. If you think you’ve been hearing a lot about it in the news lately, you’re not wrong. Recently, cryptocurrency platform Coinbase went public, becoming one of the first mainstream cryptocurrency platforms to do so. 

But what is cryptocurrency? Without getting too into the weeds about the “blockchain” technology behind it, imagine it as a currency, with no central government or bank backing it. And while totally legal in most countries, many businesses still treat it with caution (though Tesla has recently begun to accept it as a form of payment). Due to the inherent decentralization of the value of cryptocurrency, it is treated, and traded, as a commodity (more like oil or gold than dollars or euros), and is thus more responsive to market shifts, making it more likely to wildly fluctuate in value over short amounts of time. 

Regardless of its rising profile, the vast majority of people (64%) are still not at all familiar with what cryptocurrency is. 

There are over 4,000 available cryptocurrencies available and Bitcoin is by far the most well-known, with 76% of the general population reporting they’ve heard of it (by comparison, the next most popular answer, Ethereum, came in at 14% name recognition). 

As it turns out, in order to feel comfortable about investing in cryptocurrencies, people mostly want traditional banks to back its value. 

And while that tendency to trust traditional banks more than others is consistent across age groups, there are some interesting generational trends.

Gen Zers would trust PayPal more than other age groups, while Millennials would trust Google, and those between 35 and 54 would trust Amazon more than other ages. Those 55 and up lean into traditional banks even harder than their younger counterparts. Facebook, as it were, is the least trusted among any of the available options, which should tell you a little about Libra’s (or Diem’s) potential on the market.

While consumers are still deciding how they feel about cryptocurrencies and which institutions they would trust to back them, overall investment in crypto has inched upwards in the last two years. Between January 2021 and April 2021 alone, overall investment rose from 9% to 12%.

It seems what’s holding most people back from investing in crypto is either not understanding the technology, or concerns over its legitimacy.

This may be an interesting trend that could see change should a large company, whether it be one like Google or Amazon, or a large traditional bank step in with its own crypto to offer more legitimacy in potential users’ minds. 

Digital Wallets and Trading Platforms

For those unsure of how to actually buy, invest, speculate, or trade in crypto (currently 6% of the Gen Pop 18 and older, per the data shown above), the answer is fairly straightforward: digital wallets. Most Americans have digital wallets through their banks or maybe even through a non-financial institution (such as Venmo, Google Pay, PayPal, etc.). 

Of those who do have digital wallets, PayPal is the most popular with 43% of the Gen Pop reporting being a user, while Venmo is a distant second at 15%. 

But when it comes to cryptocurrency, special platforms such as Coinbase have been developed to exchange traditional funds for crypto, as well as buy and sell investments in its value. Some others, such as PayPal and Google Pay, have recently begun or announced plans to begin accepting certain cryptocurrencies as payments on their platforms, though they won’t be supporting cryptocurrency investments.

That doesn’t mean however, that people wouldn’t like to be able to use PayPal for more cryptocurrency functionality. 

The digital payment platform is still by far the most trusted for crypto purchases and (if it were possible) investments. Coinbase, however, is still fairly new so there is still time for trust in it to grow.  

Across income groupings, we see something interesting. Those households earning between $25K and $50K are far more likely than other income groups to trust PayPal the most, while those who trust Coinbase the most are the highest earners ($150K or more). This is in line with overall cryptocurrency familiarity as demonstrated above. 

Trust is largely at issue when it comes to cryptocurrency. After all, crypto can be an immensely valuable commodity – if you catch it at the right time – or a wild money pit that never bounces upwards – if you catch it at the wrong one. Add in the fact that there is nothing ensuring its value other than its investors, and you have a currency that’s only worth what everyone collectively decides it’s worth, which means it will always be a risk for businesses to accept as a form of payment. And without a large governing body behind it all, investing is really a blind jump into the deep end. 

Be sure to take a look at this week’s analysis of the changing currents underlying the personal banking industry. Spoiler alert: consumer trust is at the heart of the matter there, too. 

Next week, CivicScience offers a deeper look into the effect consumer trust has on fin-tech and the growth of alternatives to traditional banking and assets, such as NFTs.