Bitcoin Adoption and Beliefs in Canada
In the last few years, the number of so-called cryptocurrencies—a form of electronic money that allows people to make direct person-to-person transactions—has surged, with more than 740 now available. Among them, Bitcoin enjoys the highest trading value and volume as well as significant mainstream media attention.
Gaining insights into why more people are adopting cryptocurrencies is increasingly important. That’s because these currencies, if widely adopted, could affect both the banking sector and central bank’s core functions, such as monetary policy. We provide an analysis to better understand how three factors influence people’s decisions about Bitcoin adoption:
- network effects—as more people adopt and use Bitcoin, it becomes a more useful platform
- individual learning—whether beliefs about the future of Bitcoin influence a person’s present-day decision to use the currency
- social learning—how beliefs about Bitcoin are formed by those around us
We find that both network effects and individual learning are important and increase the probability of adopting Bitcoin. In other words, a person will more likely own Bitcoin if they:
- belong to a larger network of Bitcoin users
- have more optimistic beliefs about Bitcoin’s future
We also find that peers’ beliefs are not currently a key factor behind Bitcoin adoption. This makes sense because Bitcoin adoption in Canada remains low (around 5 percent).