Bitcoin Survey Purpose
One of the unanswered questions about Bitcoin is one of the absolute most basic – how much stuff do people actually buy with Bitcoin? It’s an important question. It will tell us if people actually use Bitcoin or if people are still just speculating on the future exchange value.
If it’s the latter, Bitcoin is doomed to failure. No market for goods or services means that the Bitcoin market is just waiting for a negative shock to permanently bury the currency. On the other hand, if the current userbase utilizes the currency because it provides identifiable benefits to them there is a chance that it will remain an online fixture, barring a technologically superior alternative.
As far as I know, my very basic survey is the first effort to make any effort to quantify how much people actually use Bitcoin for buying goods and services, and how much speculation is going on.
I conducted the survey using a SurveyMonkey basic account, which unfortunately limits the granularity of data I could collect, and somewhat limits my analytical abilities (I can’t automatically do cross-tabs, for instance). Furthermore, the survey is pretty unscientific. It was posted on two popular forums of discussion for Bitcoin – the Bitcoin Talk forum and r/Bitcoin. It is certainly possible that the users of these forums are not representative of the population of Bitcoin users.
Nevertheless, some very interesting patterns emerged.
How long have people been using Bitcoin?
N = 93
Of the 93 users who answered the survey (which was posted on Reddit r/Bitcoin and the Bitcoin Talk forum) most users had been using Bitcoin for at least 6 months (77.4%). Although I didn’t collect granular enough data to estimate an average, it seems that on average those polled had been using Bitcoin for about a year.
The Bitcoin Market for Goods and Services
Out of everyone who answered the survey, 72% had purchased goods and services with Bitcoin. Unsurprisingly, the longer someone has been using Bitcoin the more likely they were to have purchased something. All users who had been using Bitcoin more than two years had purchased something. Ninety per cent of all users who had been using Bitcoin for 1 to 2 years had purchased something.
Furthermore, it seems that most people plan on making a purchase in the future. Ninety-four percent of people polled plan on making a purchase in the future. It seems that it just may take some time before people are comfortable with making a purchase.
So how much, on average, have people spent? After converting to U.S. dollars (the native country of most users), the average user has spent $1,549 on goods and services. However, this figure includes a handful of users who reported spending in excess of $10,000 U.S. Nearly half of users surveyed had actually spent less than or equal to $100 on goods and services. The median amount spent was $175.
We can actually take this information and make a very rough estimate of how much stuff in U.S. dollars has been bought with Bitcoin. According to the MtGox overview, there were 22,855 active users in January. Given that MtGox services about 93 per cent of all volume, we can estimate that the total number of users currently using Bitcoin is about 25,000 (22,855/93%). This assumes that users of other exchanges have about the same transaction volume. This figure is conservative because there may be a few users who mine Bitcoin and buy goods without ever using an exchange at all, and it may be that some users of Bitcoin are inactive for more than 30 days.
So, the estimate of total goods and service bought by the currently active users is about 25,000*72%*$1,594, or about $28.3 million U.S. Each user surveyed has been active for about a year, so $28.3 million U.S. is a very, very rough estimate for the value of goods and services sold over the past year to the currently active user base.
Although the number of active users is probably an underestimate, the amount spent per user is probably an overestimate. The survey was posted on two popular Bitcoin forums, which could include users who are more likely to buy goods and services than average. It may also include more ‘power users’ – those who have bought a significant amount of goods and services – than those who exist in the general population of Bitcoin users.
Along with goods and services, 57 per cent of users said that they had made donations to non-profit groups or causes.
Has the Relative Anonymity of Bitcoin Been a Driving Factor of its Adoption?
Of the users who purchased some goods or services, 67 per cent admitted that they did so to hide their identity. This is really not surprising given the popularity of sites like Silkroad. Of course, this does not mean that users who wished to remain anonymous bought illicit goods and services – they may also just have a preference for remaining anonymous.
Have Users Purchased Bitcoin as an Investment?
It is abundantly clear, that most users have been buying at least a small amount of goods and services with Bitcoin or making significant donations to non-profit causes. So, how bullish is the sentiment on the price of Bitcoin? Are users buying Bitcoin because they expect the market for Bitcoin transactions to increase relative to the number of Bitcoins in existence?
Current Bitcoin users are overwhelmingly positive on the price of Bitcoin. A full 84% of those surveyed believe that the value of Bitcoin will rise in the future and nearly half are expecting a large increase in value. Because of the extremely positive sentiment on the price, two-thirds of users have purchased Bitcoin as an investment. On top of that, 27% are currently mining Bitcoin for profit.
N = 89
In the next post, I am going to use this data to look at some of the economics behind Bitcoin, including the velocity of money and whether there is evidence of users hoarding.
To support my efforts to increase knowledge about the Bitcoin market for goods and services, user sentiment, etc, please make donations to 1EySGJWKjN5U4gQwkvPjNApKxL1KwpCZ9L