Study of Factors Influencing Consumer to Adopt Cryptocurrency

Abstract

Cryptocurrencies have become one of the most traded financial assets in the last decade. The first half of 2022 will not be easily forgotten by the crypto faithful as it shifted investor sentiment after a monster cryptocurrency rally in 2021 that saw bitcoin (BTC) and altcoins scale multiple record peaks. Just as users were getting comfortable with their passive DeFi incomes, Terra and its non-collaterised stablecoin collapsed in a sensational turn of events. Three Arrows Capital (3AC), a crypto hedge fund that managed assets worth about $10bn at its peak, went bankrupt as falling crypto prices forced liquidations of collateralized loans and leveraged trading positions across the industry, aggravating the sell-off. Investor sentiment plummeted as crypto lending platforms like Celsius and Babel suspended withdrawals for clients. Investor sentiment plummeted as crypto lending platforms like Celsius and Babel suspended withdrawals for clients. The future of cryptocurrency still remains unclear. Given all these mess, we would like to know what factors could actually influence consumer adoption of cryptocurrency from here on out.

The purpose of this research is to study factors influencing consumer to adopt cryptocurrency. These factors include seven independent variables: Convenience (CV), Popularity (PL), Usefulness (UF), Credibility (CD), Recommendations (RC), Price Stability (PS) and Risk (RK) and one dependent variable: Crypto Behavior (BH). 400 sample were collected using electronic questionnaire through social media. We used Structural Equation Models (SEM) for data analysis. The result shows that Since the RMSEA, which is an absolute fit index that assesses how far our hypothesized model is from a perfect model, for this model is .047 (<.05) which strongly indicates a “close fit” and the Goodness of Fit Index (GFI) value is .934 (>.90), the model seems to fit well according to the descriptive measures of fit. More importantly Popularity (PL), Usefulness (UF), Credibility (CD), Recommendations (RC) and Risk (RK) seem to have significant effects on influencing consumer to adopt cryptocurrency due to their p-values are both less than .05. That means as long as cryptocurrency is becoming more popular, useful, credible and highly recommended by key stakeholders (friends & family, professionals and influencers) with better risk management, consumer will be more welcome to adopt cryptocurrency as both day-to-day currency and investment alternative. One interesting finding is that Price Stability (PS) of cryptocurrency that we’ve seen over and over again especially post-covid doesn’t seem to significantly impact much of consumer adoption.