Study: Illicit Goods Use, Age and Politics Predict Bitcoin Holdings

Researchers at the University of Illinois have analysed a survey to explore the identity of bitcoiners.

AccessTimeIconSep 19, 2014 at 12:06 p.m. UTC
Updated Sep 14, 2021 at 2:04 p.m. UTC
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If you're in your 30s, love to shop on Silk Road 2.0 and live outside the US, then chances are, you're a pretty big bitcoin user. That's what a new study delving into the profile of bitcoiners has found.

The study, titled 'Who Uses Bitcoin? An Exploration of the Bitcoin Community' is by Jeremiah Bohr and Masooda Bashir at the University of Illinois at Urbana-Champaign. Bohr is a visiting assistant professor at the university's sociology department and Bashir is director of social sciences research at the university's engineering school. The paper was first presented at the Privacy, Security and Trust conference in July.

The authors use statistical modelling to crunch the numbers from a survey conducted last year by Lúí Smyth, who was a digital anthropology researcher at University College London but now runs CoinJar's UK operations.

Who has lots of bitcoin?

Smyth's survey asked respondents how many bitcoins they held. Bohr and Bashir took this information and tried to find relationships between the number of bitcoin held and other factors, such as age, or whether respondents were active on bitcoin community forums.

Bohr and Bashir found that age was a statistically significant factor in predicting the amount of bitcoin a respondent held. Respondents with the most bitcoins were aged between 55 and 60 years old. Younger respondents had fewer bitcoins, although the amount generally doubled every 10 years. At age 60, bitcoin holdings drop off, which fits the pattern of asset accumulation across other asset classes, the researchers found.

"The marginal effects of age on bitcoin accumulation slow down and then decline," the authors write.

Age predicting bitcoin holdings
Age predicting bitcoin holdings

Another attribute that predicts bitcoin holdings is a user's degree of sociability on various bitcoin-specific platforms like the Bitcoin Talk forum, dedicated IRC channels, or the r/bitcoin sub-Reddit. Those who actively participated in bitcoin online communities owned twice as much bitcoin as those who kept mum about their cryptocurrency activities online, the authors found.

Perhaps controversially for those seeking to position bitcoin as a mainstream financial technology, the research found that users who spent bitcoin on illegal goods had significantly more bitcoins than those who didn't. Users who purchased illicit goods, such as narcotics, had up to 45% more bitcoin holdings than those who stuck strictly to goods that wouldn't get them in trouble with the law.

Price optimism

The researchers also considered the effect of age and other factors on respondents' expectations on the bitcoin price. Older users were less optimistic than younger users, with optimism about the long-term bitcoin price peaking at about age 35, and then tailing off. The "long-term" price is defined in the survey as the price on 3rd January 2019, or six years from the time of the survey.

Other factors that were positively correlated with price optimism were the level of social engagement on forums and other platforms and the timing of a user's installation of the bitcoin client. The more recently bitcoin was installed, the greater the users optimism about bitcoin's near-term price. In the survey, the "near-term" was defined as 3rd July 2013, or four months from the survey's start.

Age as factor in bitcoin price optimism
Age as factor in bitcoin price optimism

Politics and bitcoin

Smyth's survey concluded with an open-ended question, asking respondents to describe their "favourite aspect" of bitcoin in about 140 characters. Bohr and Bashir crunched these responses and grouped them into themes. They then related these themes to the respondents' self-identified political leanings and other factors from the survey including age and respondents' country of residence.

Bohr and Bashir grouped responses into themes related to anonymity, freedom and the banking system. They found political identity was not a factor in predicting whether respondents valued bitcoin for its anonymity. The only factor that suggested a preference for anonymity was whether a user was a miner or not.

Respondents who favoured bitcoin for its potential to disrupt the banking system were found to be above the age of 40, residing outside the US and identified themselves politically as greens. In fact, greens were three times as likely as centrists, conservatives and libertarians to favour bitcoin, because of its critique of the modern banking industry. A sample comment from a 34-year-old in Norway reads:

"The current monetary system is a fraud based on an old scam. Bitcoins are open, free and not a scam."

Unsurprisingly, users who like bitcoin for its freedom-promoting qualities were found to politically identify as libertarian, residing outside the US and aged between 30 and 39. One of the freedom-loving comments, from a 28-year-old in Argentina, reads:

"Freedom! Nobody can forbid me to buy/sell bitcoins, there's no government regulations on that."

Research caveats

The authors note that their findings should be viewed with a few caveats in mind. The survey results were collected before the implosion of the now bankrupt exchange Mt. Gox, which lost hundreds of thousands of coins when it went under.

"Future data collection may reveal sharp changes in attitudes of behaviours within the bitcoin community," the authors write.

The authors also highlight the fact that the survey represents only the English-speaking bitcoin community and that bitcoin's pseudonymous nature poses challenges to the collection of a random global sample. The researchers noted that no gender differentiation was required in the analysis because 95% of respondents said they were men.

Man in box image via Shutterstock.


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