Strategy Framework:
Cryptocurrency Market Segments

Last Updated: August 2021

Resulting from analysis of dozens of cryptocurrency industry data points including company reports, news articles, and on-chain data, we can identify three broad market consumer segments in the retail crypto space. Marketing leaders can use the three consumer segments and key takeaways provided in this article as a practical framework for further segmentation and strategic planning.

INFOGRAPHIC:

Download the Cryptocurrency Market Segments infographic for extra user data from major crypto platforms.

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A Growing Market

Accurate and consistent data on the cryptocurrency retail market can be difficult to come by as it is quickly changing. It’s estimated that around 221 million people globally own cryptoassets, according to a study by Crypto.com, a statistic that has doubled in the first half of 2021.¹ That number has likely increased by millions since the report was published. In the United States, around 46 million to 59 million people, if not more, own bitcoin, and globally there are about 114 million bitcoin owners.²,³,¹ The crypto market is vast, from individuals to institutions owning a range of assets within an even more diverse ecosystem including trading cryptocurrencies, collecting NFTs, and seeking yield in the world of DeFi (decentralized finance for newcomers).

As marketers, it can be daunting to understand the crypto market. Consumer usage varies from country to country and is changing monthly. Additionally, some reports provide different estimates of industry data. It can be difficult to count unique users as many people have multiple wallets and exchange accounts. For startups and more experienced firms, growth initiatives can fail if leaders don’t have a grasp of the market’s readiness for products. Product-market fit can only be possible if firms understand the people within the market and what is driving their adoption as a product moves through the technology lifecycle.

The scope of the framework below attempts to segment the retail crypto market: users (defined as wallet addresses or exchange accounts ) buying, selling, and investing in cryptocurrency through centralized and decentralized services. Note that institutional accounts were not excluded in the data review but represent a very small number of overall users. Every firm will define their market differently based on available data and proprietary insights. For management teams, starting with a framework based on market data is a valuable place to start. Once you have a solid grasp of the market, you can layer in data to better understand segments of your market and what drives their adoption.

Retail Cryptocurrency Market Segments

The following three high-level consumer segments were created by collecting and analyzing the most recent publicly available usage data from crypto exchanges, hot and cold wallets, and DeFi platforms (data from Q1-Q3 2021). The analysis is not based on dollar amount but instead the number of users with a given segment. This provides marketers an understanding of the people using the products. The proposed segments are meant to be used as a framework for understanding the overall retail market. Adoption is increasing quickly but there are clear trends in consumer behavior and growth in specific areas of the market in terms of technology and product adoption.

Segment 1: BEGINNER (50% to 70% of the current active market)

Considered the "Early Adopters" and "Early Majority" in the technology adoption lifecycle
Buy and sell most popular coins/tokens
Uses mainstream exchanges and doesn’t have hot or cold wallet
Lacks technical understanding of crypto and sticks to using mainstream platforms
Values easy-to-use, low-cost, secure exchanges
Goal to make positive return on investment
Considers crypto a hobby or minor aspect of financial lives
May follow crypto trends on social media but not on Discord or Telegram

Segment 2: INTERMEDIATE (20% to 30% of the current active market)

Considered the "Early Adopters" in the technology adoption lifecycle
Buy/Sell/Trade/Lend in various popular coins/tokens
Uses mix of exchanges, hot and cold wallets
Has some technical knowledge of crypto and comfortable with new platforms
Values security in exchanges and wallets
Goal to increase yield via multiple strategies
Crypto plays an important part of financial lives
Possibly involved in crypto communities on Twitter, Discord, and Telegram

Segment 3: ADVANCED (10% or less of the current active market)

Considered the "Innovators" in the technology adoption lifecycle
Buy/Sell/Trade/Lend in CeFi and DeFi with strategies like yield farming
Familiar with various crypto projects and coins/tokens
Uses mix of DeFi platforms, exchanges, hot and cold wallets
Values security and privacy in exchanges and wallets
Goal to use complex, high-risk strategies for double-digit yields
Crypto is a fundamental part of their financial lives
Possibly involved in crypto communities on Twitter, Discord, and Telegram

Key Takeaways for Marketing Leaders

Marketers can use the segments as a starting point to understand the cryptocurrency retail consumer market. Surveys have shown that in 2021 and 2022, crypto users may double in some countries.⁴ As more and more people invest and transact in crypto, we’ll most likely see the beginner segment grow more rapidly due to the general public being less crypto-savvy and potentially adopting crypto en masse.

Considerations for marketing leaders in the cryptocurrency industry:

Know Who You Are Talking To: If you have found product-market fit within the advanced and intermediate segments but are expanding into the beginner segment for growth, your strategy will need to evolve. The beginner segment will require simple, interactive education, social proof from other beginners, and the product needs to be intuitive. DeFi products will struggle to capture the beginner and intermediate segments unless the user experience and product terminology changes. On the contrary, if your crypto product is by nature a complex DeFi product, focus on capturing the advanced and intermediate segments without wasting resources on the beginner segment who your product will not resonate with.
Layer on Your Own Data: The three segments above are a starting point. What segments exist within the three broad groups that are relevant to your business? Are there consumers on the edges of the beginner and intermediate segments that you can “move up” to the next segment through engaging marketing, education, and improved product experience. Utilize data from community channels such as Twitter, Discord, and Telegram to identify and engage with consumers to increase their crypto knowledge and comfort.
Use Segments for Feature Testing: If you have a platform or product that is used by multiple segments, what features can be repositioned and “sold down” to the beginner or intermediate segments from the more advanced segment? Are there benefits that all segments want but need to be delivered differently through UI/UX changes?
Know When to Communicate Via Analogy: The beginner segment is less crypto-savvy and not as familiar with terminology and methods for investing in the crypto space. Within regulatory guidelines, know when to adopt language that is analogous to the banking system. Mass market consumers understand checking and current accounts, savings accounts, and certificates of deposits, but they are much less likely to know what DeFi terms like “yield farming” or “staking” mean. Both pure crypto firms and banks that offer crypto services can position buying crypto similar to buying stock using "dollar cost averaging" in messaging to to resonate with consumers.
Budget Wisely: Refrain from making large marketing investments until you have a clear idea of which segment you are communicating with and through which channels. Marketing messages will struggle to resonate across segments, especially if they contain technical product language coming from the advanced segment. Similarly, prior to making large MarTech stack and analytics investments, know the marketing processes and data that is needed to support your growth.

The crypto market is poised to grow quickly over the coming years. As the available data changes quickly, it will be most important for marketing leaders to focus on what general consumer segment their product is designed for at any given moment. One year, your crypto product may be heavily used by advanced DeFi consumers within a crypto community, and the next year, less experienced consumers may be trialing your product from word of mouth. Managing the transition through these segments will position you for growth at the right time with the right consumers as crypto continues to expand its reach.

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Sources:

Additional resources on cryptocurrency market used in research:

Strategy Framework: Cryptocurrency Market Segments

A Growing Market

Retail Cryptocurrency Market Segments

Key Takeaways for Marketing Leaders

Strategy Framework:
Cryptocurrency Market Segments