Impact of Psychology on Use of Cryptocurrencies
The use of cryptocurrencies has been very low. Let’s look at the psychology behind the lack of adoption.
Benefits of Using Cryptocurrencies
There is no denying the fact that blockchain technology is disruptive in the way it facilitates an instant and cheap transfer of money. However, the level of adoption remains abysmally low.
An article published earlier on Monday in psychologytoday.com explored the psychology behind what drives consumer behavior.
The primary use-case for which Bitcoin was invented was “Transfer of Value”. Using cryptocurrencies for payments can be beneficial for consumers and merchants alike. Some tangible benefits that could be derived include:
- Lower transactional costs compared to other instruments like credit cards or cash. By accepting crypto-payments, merchants can save upwards of 2% and pass on some of these benefits to consumers.
- Removes intermediaries and reduces the risks of frauds and identity thefts.
- The transactions are secure and private. The only drawback here being that the anonymity can be misused for illegal activities like money laundering.
- Using cryptocurrencies for payments would mean that one could travel anywhere around the world without the need to change one fiat currency for another.
Why Is the Adoption Low?
Despite the massive potential, adoption has been not only low but slow as well. The exponential rise in the price of Bitcoin towards the end of 2017 was mostly driven by speculation of retail investors and not real-world use.
The article reports that:
A 2016 study found that less than 1 % of Americans owned or used any cryptocurrency. More recent estimates put the number of adopters at 5-8 %. However, almost all of these individuals are trading cryptocurrency, not using it as money.
Here are the reasons that contribute to the low level of adoption:
- The lack of standards. Currently, there are too many competing cryptocurrencies out there. And new ones are being created every day. “Consumer psychology research shows that when a market lacks one standard, consumers are slow to adopt the innovation because of the uncertainty,” explains the article.
- High volatility has been another deterrent. In the last one year, the value of Bitcoin has oscillated between $5,857 and $18,343. 10-15% swings in a day are considered normal for a cryptocurrency, making them unfit for payments.
- The third reason is the small number of merchants that accept payments in cryptocurrencies. Merchants will not adopt new technology till there are enough consumers who are willing to pay with digital assets.
For customers, there is no pressing need to change as they are comfortable with current methods like credit cards, or fiat-based e-wallets like PayPal.
Is Anyone Using Cryptocurrencies?
There are a few niche sectors where the use of cryptocurrencies has picked up, according to the article. Sports gambling was introduced at the FIFA World Cup tournament earlier this year, It has since expanded to NFL football.
Digital currencies have also been used in real estate transaction in Florida and California. Art is one more area where consumers can buy artwork with cryptocurrencies.
Recently Live Bitcoin News reported about cryptocurrencies being accepted by an auto dealer in New England and a restaurant in New Jersey.
While encouraging stories of adoption pour in from across the globe, the number is still far from desirable.
Do you agree with the arguments presented above? Let us know in the comments below.
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