00:00:00
Cait Lamberton: Yeah, it seems to us
that the dominant crypto
00:00:03
currencies are those that people
anchor on the most. So they're
00:00:06
going to key in on what's going
on with Bitcoin. They're going
00:00:09
to key in on what's going on
with Ethereum. Those are, you
00:00:13
know— they're— they're the
loudest in the market. That
00:00:15
doesn't mean that others don't
matter. But I— as we track
00:00:19
cryptocurrency confidence, we
see a fairly strong association
00:00:22
with those prices.
00:00:25
Welcome to <i>The Ripple Effect</i>,
the podcast that takes you on a
00:00:28
journey through the minds of
Wharton faculty. I'm your host,
00:00:32
Dan Loney, and in each episode,
we'll be diving deep into the
00:00:35
inspiration behind the
groundbreaking research that
00:00:38
Wharton professors have
conducted and exploring how
00:00:41
their findings resonate with the
world today.
00:00:44
So how do consumers
00:00:46
feel about cryptocurrency right
now? There is promise seen by
00:00:50
many, but cautiousness from
others. Pleasure to be joined by
00:00:54
Cait Lamberton, who is Professor
of Marketing and Co-Editor of
00:00:57
<i>The Journal of Warketing</i> here at
the Wharton School. Cait, great
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to talk to you again. How are
you?
00:01:02
I'm doing great. How are you?
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I'm good. You know, I think
it's interesting because there's
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so much exuberance around
cryptocurrency, but it's still,
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you know, an interesting process
that a lot of people are trying
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to learn what cryptocurrency is
and what it will be able to do.
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So probably the attitudes of a
lot of consumers are— are kind
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of all over the map.
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Yeah, it's very confusing. And
it's interesting because it's
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called cryptocurrency, so we
think it's going to act like a
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currency. And so if you come at
it from a finance perspective,
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you assume that what that means
is there's some stable
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underlying thing about which
people can agree, and there's an
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underlying asset, and we can at
least, given good data, figure
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out what it's worth. But the
reason we're interested in this
00:01:48
from a marketing perspective is
because it acts more like
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marketing things do, in the sense
that it's very subjective and
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it's very malleable, and it's
very heterogeneous as a result,
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both within and across people,
and within a moment and across
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time. And so when you say people
are trying to learn about it, we
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can understand why it's so hard
to learn about. The data changes
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constantly. And you ask one
person or another person, not
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only are their perceptions
different, but the data they're
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using to form their perceptions
are different. So learning it is
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a tricky task, and you can't
blame anyone who sort of throws
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their hands up in the air and
says it's a moving target.
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Well, and realistically, it
doesn't help it that we've had
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instances pop up over the last
few years of negative actions.
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FTX being one of them. You know,
from a marketing perspective,
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the old line— and I'm sure
you've used it from time to
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time— "Any press is good press."
This is not the case when you
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have something like FTX pop up.
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It's only good in the sense that
it makes people pay attention
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and perhaps be more careful.
We've also seen a lot of high
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profile cases where people were
taking advice from individuals
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whose understanding of
cryptocurrency was perhaps also
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not founded in the best data
available, or who perhaps had
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faith in cryptocurrency that was
rooted in information given by
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sources that were drawing
information from another source
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that was less or more reliable,
but again— so— so we can say all
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press is not good press, but I
think to the extent that it
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provides more information to us
about how this works, it's
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useful for us, at least as a—
you know, as either a cautionary
00:03:31
tale or an informative option
for us. And to that extent, although
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these things are negative
in the short term, I think they
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do provide some illumination
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about the way it can unfold
in the market.
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So you and your colleagues here at
Wharton have come up with the
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Consumer Cryptocurrency
Confidence Index. Tell us a
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little bit about it and why you
think it will be important
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moving forward.
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Yeah. So given that— that
cryptocurrency is such a
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socially valued phenomenon, we
were really interested in how
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that value was emerging. It
seemed to us that in the world
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of really most blockchain
assets, the value is driven by
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basically what people think of
it. And in fact, one of my
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collaborators on this index,
Martin Paul Fritze and I had
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also written a paper on the way
that people valued NFTs, which
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are another blockchain-
associated asset. And what we
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found there is that the value is
completely driven by social
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currency. It's not about even
scarcity, which, in classical
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economic terms should matter.
But scarcity, if anything, had a
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negative effect. So we thought,
okay, if this is all about
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social value, then what matters
is just how people feel about it.
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And so shifting that over to
cryptocurrency seemed a natural
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step. And the nice thing about
confidence is that— is that
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people can tell you how
confident they are. That's a
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completely subjective
perception, and it's easy for
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people to self report. And so we
simply started asking people.
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You know, how— how—
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how well do you think
this is going to go? How likely
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is it that you're going to be
able to use this at more places
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in the next six months? How
likely do you think this is
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going to be widely accepted?
How— how likely do you think
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it's going to be that it has
more as opposed to less value in
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the future? People can make
those predictions, and perhaps
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those predictions are all that
really matters in determining
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how much they're willing to pay
for it in the present.
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How much does the fact that
there are several crypto
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currencies out there— does that
impact the mindset of the
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consumer yet? Or is that still
somewhat to be determined?
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Because, again, this is still
relatively new.
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Yeah, it seems to us that the
dominant crypto currencies are
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those that people anchor on the
most. So they're going to key in
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on what's going on with Bitcoin.
They're going to key in on
00:05:48
what's going on with Ethereum.
Those are— you know, they're—
00:05:52
they're the loudest in the
market. That doesn't mean that
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others don't matter. But I— as we
track cryptocurrency confidence,
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we see a fairly strong
association with the— those
00:06:03
prices. Some of the others that
are more short-lived possibly
00:06:09
track momentarily with the more
dominant cryptocurrencies. But
00:06:14
you know, to be honest, we
haven't looked at what happens
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when there might be a flood of
smaller cryptocurrencies that
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enter the market and leave. It's
likely that those are going to
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be noticed by a smaller segment
of the population. We're trying
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to capture the confidence that's
a list that is expressed by
00:06:30
general population. So we're
capturing samples that are not
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only people who already own
crypto, who are already
00:06:38
following crypto, but people,
perhaps, who have a less direct
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connection to crypto on a daily
basis.
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So what are they telling you, then,
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about cryptocurrency, their
00:06:47
understanding, their potential
use? I mean, there's certainly,
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obviously a lot of questions
that could be asked right now.
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Yeah. So an interesting thing is that
since we started collecting this
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data in early 2023, it has
steadily increased, which you
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would expect with any new
technology, any new product. As
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it becomes more familiar, even
if people don't really know a
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lot more about it, just by
virtue of becoming more
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familiar, people feel like, "Oh,
it's probably more okay," by
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virtue of sticking around. But
there's some really interesting
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asymmetries in it. So for
example, people are far more
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willing to pay in cryptocurrency
than they are willing to be paid
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in cryptocurrency. Which is kind
of a funny thing, because it
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really doesn't make any
difference. You're— you know,
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it's just money going in and out
of your bank account. But
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they're still not quite okay
with you paying them. So— so
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that's kind of— that tells you
that there's still some
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wobbliness in there, even if
they say they're very confident
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in it. I think that when we get
to the point where consumers
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say, "Okay, it's okay for me to
receive my wages in
00:07:49
cryptocurrency," then we're
seeing really strong level of
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confidence that this is a
legitimate way to exchange
00:07:56
value. People still do recognize
that it's extremely volatile.
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They absolutely recognize that,
but some of them find that
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exciting. And I would say that
is probably, you know, the core
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finding. If we were to step back
from our data as a whole, we
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would say there's massive
heterogeneity in people's
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perceptions. Some people see
that as an investment. And if
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that's the case, then we would
say, "Okay, we should think about
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this as an investment. Perhaps
that's how it should be
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discussed." Some people, however,
do see it as a currency. Okay,
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that's a completely different
class of material. So that's a
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different language and a
different category. So depending
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on how people categorize it, we
might need to use a different
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language for it. So I think one
of the things that we're trying
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to understand is how people
categorize this, what drives
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them to categorize it one way or
another, and therefore how they
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handle it. You know, what kinds
of risks they're willing to
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take, what they're not willing
to take, whether they're willing
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to give it to charities, whether
they're willing to accept it,
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et cetera.
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Well, I guess it's interesting
then. The more— or, you know, the
00:09:00
frequency we see of companies
deciding to accept
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cryptocurrency for payment, then
we have more of an opportunity
00:09:08
to see its potential growth as
we move forward. I remember a
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story a couple years ago, the
Oakland A's baseball team was
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trying out accepting
cryptocurrency for tickets for
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people who wanted to, you know,
to come to the games. It didn't—
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didn't help them a lot. But
still, you know it, I guess
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there is this feeling out
process of seeing how you can
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use it.
- Yeah,
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and we're just starting to study
that. We are looking right now
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at what we're calling crypto
creep— which sounds bad, but we
00:09:36
don't mean it in that way. So
we're just starting to look at
00:09:39
the proliferation of
cryptocurrency ATMs
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geographically, to try to
understand the relationship
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between, for example, localized
levels of crypto confidence. So
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we can understand, at least to
some extent, from tax records,
00:09:56
the geographic areas in which
cryptocurrency ownership
00:10:00
is the highest. And then we can
start to look at the areas in
00:10:03
which acceptance by businesses
and access via ATMs is higher.
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We can look at how those things
are unfolding over time. Is it
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the case that the businesses are
leading, in the sense that
00:10:15
they're saying, we're going to
accept this? And then more
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people in that geographic area
decide that it's— it makes sense
00:10:23
for them to own cryptocurrency.
Or is it the case that the
00:10:26
private individuals decide to
own cryptocurrency and then the
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businesses follow? We're hoping
that over time, if we can watch
00:10:33
this, we can see who's leading
and who's following. Because
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that's a really interesting
demonstration of how a
00:10:38
technology diffuses with a
really specifically socially-
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driven kind of technology.
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Is it safe to assume that if
you're somebody who is kind of
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in the crypto world right now,
that at least you're aware of
00:10:54
and thinking more about the
potential of regulatory in this
00:10:58
space than, say, more so the
public in general who just
00:11:02
hears the word cryptocurrency
and they're not sure about what
00:11:05
is all entailed?
00:11:06
Yeah, you know, I don't know. I
think— I think none of us know
00:11:09
what will happen with
regulation. Again, it takes us
00:11:12
back to the question of what
exactly this is. Whether it's an
00:11:15
investment or a currency, or
whether it's a blend of both, or
00:11:18
whether it's something different
entirely. What I can tell you is
00:11:22
that we— we've come to understand
that there's a psychological
00:11:26
factor that underlies people's
acceptance of cryptocurrency
00:11:29
that is quite independent of
political partisanship. There's
00:11:36
a correlation, but we can't make
some kind of causal claim. And
00:11:40
the psychological construct is
distributed trust. So people who
00:11:43
tend to believe that the world
is safer when centralized
00:11:48
institutions are running the
system tend to be less
00:11:52
comfortable with cryptocurrency,
because cryptocurrency is based
00:11:56
on the idea that trust should be
democratized, right? And so you
00:12:00
would— you would expect that
people who believe in
00:12:03
centralized institutions are
going to be more pro regulation,
00:12:06
and they're going to say, "Okay,
maybe this stuff can be out in
00:12:09
the market, but we need a
centralized institution to make
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sure that it's managed in a way
that's safe." Those people might
00:12:17
also choose not to own
cryptocurrency because they're
00:12:19
not— they're not particularly
comfortable with this level of
00:12:22
democratized trust that exists
in cryptocurrency to begin with.
00:12:26
Cryptocurrency owners like this
idea that the world is safer
00:12:30
when everybody has a little bit
of control as exists on the
00:12:33
blockchain. For those people,
regulation doesn't make the
00:12:37
world— worlds— feel any safer. And
so they're gonna have a very
00:12:41
different attitude toward that
kind of process. So I think
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we're gonna— we're gonna see
different psychological
00:12:47
processes unfold that will
affect both the way people
00:12:50
interact with cryptocurrency
00:12:52
and the way that they
think about regulation.
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Where do you think the research
00:12:57
takes you guys next,
in terms of trying to
00:12:59
better understand what's
going on?
00:13:02
Well, I think the causality
behind the confidence itself and
00:13:10
the prices of the cryptocurrency
is something that we're still
00:13:13
trying to understand. There are
so many factors that affect
00:13:18
people's confidence in something
like cryptocurrency, and there's
00:13:24
so many chicken and egg
problems. You know, we'd like to
00:13:26
be able to say we understand
what raises confidence in this.
00:13:30
We'd like to be able to say that
it's confidence purely that is
00:13:34
changing the price. It's likely
that, in some cases, people's
00:13:38
innate confidence pushes the
price. It's possible, however,
00:13:41
that the price changes and then
people's confidence changes. So
00:13:45
we want to keep trying to
understand that. We have some
00:13:47
ideas at present, and we have
some preliminary analysis, but
00:13:50
it's a very hard thing to
untangle. And as we see more,
00:13:55
you know, external shocks,
becomes even noisier. So we want
00:13:59
to keep trying to understand
that. And beyond that, I think
00:14:02
we're going to continue to
understand how cryptocurrency
00:14:06
changes in its use in the
marketplace. It's going to keep
00:14:09
evolving. I think when crypto
first start— first came in the
00:14:13
market, there were people who
said, "This is a blip." You know,
00:14:16
this— "This thing is going to
come and go." At this point, I
00:14:19
think that's a very tough case
to make, whether people like it
00:14:21
or they hate it. It's shown that
it has some staying power, and
00:14:26
that is probably because it's
learning how to evolve. It's
00:14:29
learning how to find places
where it can become truly useful
00:14:35
to people. So it'll be really
interesting to see how it
00:14:38
continues to find pockets of
indispensability so that it—it—
00:14:44
it becomes a stable part of our
market.
00:14:47
Cait, great to talk to you
again. Thanks very much for your
00:14:49
time and your insight.
00:14:50
Nice talking with you too.
00:14:52
You got it. Cait Lamberton, Marketing
Professor and Co-Editor of <i>The</i>
00:14:55
<i>Journal of Marketing</i> here at the
Wharton School.
00:14:58
Thank you for listening to
<i>The Ripple Effect</i>.
00:15:00
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00:15:01
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