Why are Cryptocurrency Banks so Unsustainable? What Crypto-enthusiasts Say

@juliayu

Launch of 3 startups, 3 VC rounds, break-even. Love FinTech & MarTech

Credibility

The world of cryptocurrency banks has only recently started. However, in less than a year, most of the biggest banks have either filed for bankruptcy or shut down. This string of defeats has also hit the companies that remain afloat: tighter regulation, millions of dollars in fines, and restrictions on advertising are not all that prevent crypto banks from staying afloat.

Cryptocurrency companies act as the cryptocurrency equivalent of a bank, offering a standard set of services for financial institutions, including loans, deposits, bank cards and the ability to cash out their assets. For example, users of such products receive passive income by depositing Bitcoins into their accounts, but the interest on such deposits is more favorable than the interest on fiat currency in a classic bank.

So why are cryptocurrency banks so unsustainable? What do they need to offer users in order to be profitable? Do investors need higher interest rates on deposits or should companies offer high-yielding but riskier strategies? I surveyed 500 crypto investors through some research and here's what I learned.

They invest no more than $100

• 43.4% invest up to $100 per month in cryptocurrencies;
• 27.5% invest no more than $10 or generally do not invest regularly.

Crypto Investor Survey by Julia Goncharova, 2023

They don't have enough money and are afraid of losing money when the market drops

• 34.8% cannot invest more because they don’t have enough money;
• 23.4% are afraid of losing their funds;
• 21% said that among the factors preventing them from investing more is not understanding when to buy and when to sell assets.

Crypto Investor Survey by Julia Goncharova, 2023

They devote 1 hour per week to cryptocurrencies

• 49% are not willing to devote more than 1 hour a week to learning crypto tools.

Crypto Investor Survey by Julia Goncharova, 2023

• Almost as many (44.4%), in another question, said they felt their involvement in cryptocurrencies was not high enough: in their own estimation, they hardly follow the market, read news and analyze coins or devote little or no time to it.

Crypto Investor Survey by Julia Goncharova, 2023

They expect to earn passive income and make cryptocurrency their primary income

Those who dream of making cryptocurrency their primary income are investing no more than $10 today

• 50% want to earn passive income.
• At the same time, half of those who dream of making cryptocurrency their primary income are investing no more than $10 today.

Crypto Investor Survey by Julia Goncharova, 2023

They don't tend to diversify risks

• Most respondents (28.4%) invest savings only in cryptocurrency without diversifying risks.
• Another third (26.9%) distribute savings between crypto and stock markets.
• 22.5% distribute savings between cryptocurrencies and bank deposits

Crypto Investor Survey by Julia Goncharova, 2023

They don't believe crypto millionaires got get rich by learning to understand the market and its instruments

• To one of the questions, 70% of the audience answered that crypto millionaires are those who were lucky enough to buy an asset at a cheap price and sell it at its peak.
• And only 17% believe that successful investors earned their fortune thanks to their knowledge and skills in working with cryptocurrency instruments.

Crypto Investor Survey by Julia Goncharova, 2023

Conclusions

More often than not, crypto banks don’t have the sophisticated tools that cryptocurrencies have, their functionality is oriented towards the general user who wants to make money passively and without high risks: buy cryptocurrencies and altcoins, hold them long as shares of companies on the stock market.

We see that most of the products appeal to yields higher than those of a bank.

Another part offers high-yield strategies in exchange for a deep dive into high-risk financial instruments.

At the same time, most of the audience interested in cryptocurrencies are people with a minimal amount of free money (up to $100/month) and a high fear of losing it.

The active audience of cryptocurrency banks are users who are not well versed in financial instruments, but want to earn passively or simply store funds in crypto

Understanding the desires and fears of users, cryptocurrency companies must offer fundamentally new products that will improve financial literacy and simplify onboarding into more complex instruments for beginners.

Some of these instruments can offer high returns in the future (e.g., index tokens), while others will require a deeper understanding and involvement (e.g., as dual-currency deposits).

To earn more, companies must address users' fears and lack of knowledge related to losing money when the market falls, coin selection, diversification, and time to invest.