Are Bitcoin Holders Financially Dumb? Study Explores

• Bitcoin owners are highly knowledgeable of the Bitcoin network, but score low on general financial literacy, the study concludes.
• Additionally, most Canadian Bitcoiners are young, male, employed university graduates with high household income and relatively low financial literacy.

The Bank of Canada researched to find out the level of financial literacy among Bitcoiners. According to the results, Bitcoin (BTC) owners, on average, are less financially literate than traditional investors who object to Bitcoin.

The study, entitled “Bitcoin Awareness, Ownership and Use: 2016-20,” was conducted over four years, between 2016-2020. Annual surveys had between 1,987- and 3,893 participants.

Published on April 19, a key conclusion of the study was that:

Bitcoin owners displayed greater knowledge about the Bitcoin network than nonowners, yet they scored lower on questions testing financial literacy.

Canada’s central bank reported similar findings in 2020.

Bitcoin owners score low on the financial literacy scale

Of note, the study provided six multiple-choice questions – three on BTC, and three on financial literacy. Questions on BTC focused on its supply, its digital ledger, and government backing. Meanwhile, questions on financial literacy focused on interest rates, inflation, and understanding of stock and mutual funds.

The above conclusion is arguable to some extent. One might say the study was inadequate in measuring financial literacy since it provided a limited number of questions. Still, the questions were relatively easy, even for someone who has not been to an economics class.

In that conclusion, the researchers say it is important to explore the “interaction between financial literacy and participation in the market for crypto assets.” The team reasons that there are many risks associated with cryptocurrencies, and they make it necessary for crypto users to acquire further education.

Characteristics of Bitcoiners and non-Bitcoiners

Other than literacy levels, the study also took a look at the prominent characteristics of Bitcoiners. Researchers found that over the study period, the average BTC holders belonged to the demographic group of young males, aged between 18-and 34. Additionally, in each of the four years, male respondents were at least double the number of female respondents:

Overall, marginal effects are consistent with descriptive findings already discussed. We find that the probability of Bitcoin ownership decreases with being female, older, and unemployed, but increases with education.

More specifically, the report says the typical BTC holder is a young educated male who is employed and earning over $70,0000:

In particular, Canadians who were young, male, employed, had a university degree, high household income and relatively low financial literacy were more likely to own Bitcoin.

On the other hand, those that were more financially literate were “more likely to be aware of Bitcoin but less likely to own it.”

While nearly 90 percent of the population were aware of BTC, only 5 percent owned it, the study reports. The reasons for not owning BTC were poor understanding of its technology, and being satisfied with current payment methods. The next highest reason was a lack of trust in “a private currency that is not backed by a government.”