Canadians Who Owned Bitcoin Were Up by 13% in 2021; Bank of Canada Report

Cryptoasset ownership is expanding as well, mostly as a speculative investment rather than a means of payment. Up from 5% in 2020, Bitcoin was owned by around 13% of Canadians in 2021. The average Bitcoin holdings were around $500, primarily for investment purposes says Bank of Canada 2022 report.

New report out from the Bank of Canada ??#bitcoin holders:

2020: 1.9M (5% of pop.)
2021: 4.9M (13% of pop.)

THREE MILLION new bitcoiners in a single year. pic.twitter.com/S3naoEDZSN

— Anil (@anilsaidso) June 9, 2022

To date, the extreme price volatility of these unbacked crypto assets, as well as high transaction costs, have been major roadblocks to their widespread use as a payment method by merchants. Prices of crypto assets like Bitcoin and Ether, for example, were four to five times more volatile in 2021 than the S&P 500 stock market index. Investors who own these types of crypto assets may be exposed to severe financial losses as a result of sudden price corrections.

Interconnections between unbacked crypto-asset markets and the financial system appear to be restricted at the moment, but they are rapidly developing. In recent years, institutional engagement in these markets has increased. However, because of a lack of easily available and reliable statistics on financial system players’ exposures to these markets, measuring the expansion of institutional investments in these assets and supporting infrastructure is difficult. Portfolio exposures appear to be minor, according to discussions with industry participants.

Closed-end funds, crypto exchange-traded funds, and publicly listed companies dealing in or mining crypto assets have all made crypto assets more accessible to investors in recent years. Additionally, hedge funds and certain large pension funds are said to be increasing their investments in crypto-asset platforms.

As seen by the emergence of crypto derivatives markets as well as their use as investment assets or collateral for loans, crypto assets are also becoming more integrated into the regular financial system (a process known as the financialization of crypto assets).

The fact that the huge sell-off in crypto assets in May 2022 was largely insignificant for the traditional financial system in Canada and abroad supports the Bank’s conclusion that these markets are not yet of systemic importance.

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