Crypto Adoption Flatlines from FOMO to Buyer's Remorse by 2022

FOMO to Regret in 2022

In 2022, the allure of cryptocurrencies seemed to lose its shine as market volatility, regulatory crackdowns, and NFT hype led to a significant drop in cryptocurrency adoption. 

Main Points

  • Cryptocurrency adoption stagnated in 2022, remaining at 10% among U.S. adults after doubling in the previous two years.
  • The crypto market faced significant challenges in 2022, including crashing prices, regulatory actions, and the decline of the NFT trend, leading to "buyers' remorse" among crypto owners.
  • While 2023 brought some recovery in crypto prices, many investors appeared hesitant to buy low during market weaknesses, indicating a departure from traditional investing strategies.

A survey conducted by researchers at the Federal Reserve Bank of Atlanta revealed that the number of people who owned cryptocurrency remained stagnant at 10% among U.S. adults throughout 2022, a stark contrast to the exponential growth observed in the two previous years.

The cryptocurrency market, once characterized by explosive price surges and frenzied buying, witnessed a sobering reality in 2022. Bitcoin, the poster child of the crypto world, saw its value plummet to less than half its peak in November 2021. As headlines were dominated by stories of crypto kingpins facing legal troubles and the dramatic decline of the NFT (Non-Fungible Token) craze, investor sentiment soured.

Researchers at the Atlanta Fed used survey data and cryptocurrency price analysis to highlight a prevailing sentiment they referred to as "buyers' remorse" among crypto owners. They noted that the initial euphoria of quick gains from crypto speculation had faded in the aftermath of the spring 2022 market crash.

"This makes us think that the get-rich-quick allure of crypto speculation waned in the wake of the spring 2022 market crash," wrote the Atlanta Fed researchers in a blog post accompanying their analysis. "Buyers' remorse is real. Euphoria, anxiety, and regret all apply to crypto."

The year 2023 brought some relief to crypto investors, with Bitcoin's value showing signs of recovery. As of the latest data, Bitcoin was trading at around $26,521, up from its year-end 2022 value of $16,604. However, it remains far below its peak price of $67,617 reached in November 2021.

Despite the lower asset prices providing what some would consider a growth opportunity, the Atlanta Fed researchers noted that few crypto investors seemed to take advantage of this situation. Kevin Foster and Claire Green, the authors of the accompanying survey note, observed a trend that contradicted traditional investment wisdom.

"This is pretty much the opposite of Benjamin Graham's investing philosophy, which sees weakness as a time to buy and strength as a time to sell," Foster and Green wrote. "In this data, crypto speculators appear to buy high and refrain from buying low."

In conclusion, the survey conducted by the Federal Reserve Bank of Atlanta shed light on the challenging year 2022 was for the cryptocurrency market. Despite the promising growth witnessed in previous years, the crypto space faced headwinds that left investors cautious and seemingly reluctant to capitalize on lower asset prices. Whether this trend continues or if crypto markets will regain their former allure remains to be seen.
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