The following article was written by Wharton marketing professors David Reibstein, Cait Lamberton and Z. John Zhang, and visiting scholar Martin P. Fritze. It is based on the findings of their Consumer Cryptocurrency Confidence Index (c3i), which they launched with support from the Wharton AI & Analytics Initiative and the Mack Institute for Innovation Management.
Online lists of “celebrities who love crypto” happily trumpet the support of high-profile characters ranging from Paris Hilton to Hugh Laurie as advocates of blockchain-enabled payments. For people with bank accounts that can absorb volatility easily, such allegiance may reflect more curiosity than confidence. But among the general population who believe in cryptocurrencies, why do these emerging forms of value appeal to them, despite price swings, bank failures, and PR challenges?
Given the centrality of trust in the crypto-economy (see Kevin Werbach’s outstanding book and this podcast), understanding the drivers of confidence from a consumer perspective in this sector is critical. To do this, we began collecting data from online panelists in January 2023, trying to build a baseline understanding of confidence in cryptocurrency. More importantly, we wanted to understand what drives that confidence, and how it might change over time.
These online panelists look much more typical than Hilton and Laurie: On average, they have an age of 42.14 years (SD=14.05), and have a 47.4% female/50.9% male (rest “other/prefer not to declare”) gender split. Though much remains to be learned, after more than 1.5 years of data and over 25,000 responses have been analyzed, we have some insights into how political conviction tints individuals’ confidence in crypto — and more importantly, why.
We find that as political conservatism increases, so does confidence in cryptocurrency. Specifically, individuals who rate themselves as more conservative on a 7-point scale — where 1 represents extremely liberal and 7 represents extremely conservative — tend to show greater optimism about statements like, “Do you think cryptocurrencies will become more important or less important in business over the next 12 months?” (with 1 meaning definitely less important and 7 meaning definitely more important).
We find that as political conservatism increases, so does confidence in cryptocurrency.
Moreover, the more conservative they are, the more likely consumers were to indicate current cryptocurrency holdings. A total of 41% of Republicans, compared to 32.4% of Democrats, reported owning cryptocurrencies. With an overall average of about one-third of the sample holding cryptocurrencies, Republicans significantly exceed the general trend.
A Key Factor: Distributed Trust
We also have some initial insights about why self-described conservatives are confident in crypto and how they think about it. Rather than feeling that trust is best placed in institutions like the Federal Reserve, conservatives tend to place more stock in distributed trust. In contrast to trust that relates to a 1:1 relation to a person or institution, distributed trust can be defined as a decentralized form of trust that spans multiple entities and where no single entity alone can dictate the outcome.
In our data, we captured belief in distributed trust by asking questions like, “In general, who do you trust more (1 – Individuals; 7 – Institutions),” “In general, what type of system would you feel more comfortable in? (1 – A system with CENTRALIZED power; 7 – A system with DECENTRALIZED power).” We find that as conservatism rises, so does trust in individuals (vs. institutions) and trust in decentralized (vs. centralized) power.
While only time will tell if current crypto-confident consumers will fare well riding out long-term vacillations, we anticipate that ongoing changes in regulation and the political landscape will continue to shift perceptions at a macro level. In this sense, we believe that research on consumer confidence in cryptocurrencies will also provide important insights, allowing us not only to consider the way that this emerging form of currency evolves from a technical perspective, but also the way in which it both shapes and responds to consumers’ everyday experiences, fears, and aspirations.
Read more about the Consumer Cryptocurrency Confidence Index here.
