Cryptocurrency usage in Canada is experiencing a decline in 2023, as revealed by a recent survey conducted by the Ontario Securities Commission (OSC). The survey aimed to understand consumer interactions with virtual assets, investment experiences, key drivers, and market determinants. The findings indicate a decrease in the ownership of digital assets from 13% in 2022 to 10% this year. This trend has raised concerns among experts, who attribute it to the bear market and tighter regulations leading to a decline in prices. In this article, we will delve deeper into the survey results, explore the reasons behind the decline, and examine the broader macroeconomic factors affecting the cryptocurrency landscape in Canada.
The Survey Results
The OSC survey revealed a shift in Canadian sentiment towards digital assets. While 38% of respondents believed that cryptocurrencies would play a significant role in the future of finance last year, only 26% share the same opinion this year. This change in perspective underscores the diminishing confidence in the potential of digital assets to revolutionize various sectors of the economy.
Despite the decline in ownership, the survey also highlighted an interesting trend – the average ownership per user has increased. This means that while the number of users leaving the market has risen, the remaining holders have significantly increased their stake. The average market cap has risen from $52,975 this year to $82,992 in 2022. However, it is worth noting that 77% of Canadians express regret over their exposure to digital assets, citing underperformance as a major concern. This sentiment is a significant departure from the 68% who expressed regret last year.
Factors Influencing the Decline
Several factors contribute to the decline in Canadian cryptocurrency users. One key factor is the crypto winter experienced in 2021. Although the bull market of 2021 initially brought widespread adoption and interest from institutional investors, subsequent market crashes, such as the Terra Network and FTX implosions, led to a loss of investor confidence. The resulting pressure from regulators and the significant decrease in the prices of top assets, including Bitcoin (BTC) and Ethereum (ETH), by more than 55%, have deterred many potential users.
Furthermore, the survey revealed that many Canadians still prefer traditional payment methods over Central Bank Digital Currencies (CBDCs). Despite widespread awareness, Canadians are less enthusiastic about CBDCs, as they continue to rely on current payment options. A report from the Bank of Canada further supports this observation, suggesting that the country’s CBDC project is not meeting users’ expectations.
The Impact of Macroeconomic Factors
The decline in Canadian cryptocurrency usage cannot be fully understood without considering broader macroeconomic factors. The fear of a recessionary market is a significant concern among users, as it affects their confidence in the stability and future prospects of digital assets. Economic uncertainties, such as inflationary pressures and geopolitical tensions, can lead individuals to prioritize more traditional investment options, leading to a decline in cryptocurrency adoption.
Additionally, tighter regulations imposed by the government can contribute to the decrease in cryptocurrency users. While regulations aim to protect investors and ensure market integrity, their impact on the overall market sentiment cannot be overlooked. The perceived complexity and uncertainty surrounding regulatory frameworks may discourage potential users from entering the market.
Future Outlook and Potential Reversal
Despite the current decline in Canadian cryptocurrency users, there is still optimism for the future. The survey revealed that 34% of citizens believe the situation will change, indicating a potential reversal in the trend. Furthermore, 49% of users express their belief in the future of digital assets by stating that they will continue investing in cryptocurrencies in 2022.
To regain trust and attract more users, the cryptocurrency industry in Canada must address the concerns raised by current users. Improving transparency, providing better education on investment strategies, and enhancing overall market stability are key areas that need attention. Additionally, regulatory frameworks should strike a balance between protecting investors and fostering innovation to create a favorable environment for cryptocurrency adoption.
Conclusion
The decline in Canadian cryptocurrency users in 2023 can be attributed to a combination of factors, including the bear market, tighter regulations, and broader macroeconomic uncertainties. The OSC survey highlights a shift in sentiment among Canadians towards digital assets, with fewer individuals believing in their potential to transform the economy. However, despite the current decline, there is still hope for the future, as a significant portion of users remains optimistic. The industry must address the concerns raised by current users and work towards creating a more transparent, stable, and user-friendly environment to encourage wider cryptocurrency adoption in Canada.
Source: Bank of Canada
