The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments

Forthcoming, Review of Finance

SAFE Working Paper No. 277

77 Pages Posted: 31 Dec 2019 Last revised: 8 Nov 2021

See all articles by Andreas Hackethal

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Tobin Hanspal

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

Dominique Lammer

affiliation not provided to SSRN

Kevin Rink

Goethe University Frankfurt

Date Written: December 10, 2019

Abstract

Cryptocurrencies have received growing attention from individuals, the media, and regulators. However, little is known about the investors whom these financial instruments attract. Using administrative data, we describe the investment behavior of individuals who invest in cryptocurrencies with structured retail products. We find that cryptocurrency investors are active traders who are prone to investment biases and hold risky portfolios. Cryptocurrency investors are more likely to invest in stocks with high media sentiment and more likely to employ heuristics from technical analysis. In line with attention effects and anticipatory utility, we find that the average cryptocurrency investor substantially increases account logins and trading activity after his or her first cryptocurrency purchase. Furthermore, cryptocurrency investors tend to tilt their portfolios towards even more risky securities after cryptocurrency adoption. Our results document which investors are more likely to adopt new financial products and help inform regulators about investors’ vulnerability to cryptocurrency investments.

Keywords: Bitcoin, Cryptocurrencies, Structured retail products, Retail investors, Household finance, Investor behavior

JEL Classification: G50, G40, D14, G11, G15, G02

Suggested Citation

Hackethal, Andreas and Hanspal, Tobin and Lammer, Dominique and Rink, Kevin, The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments (December 10, 2019). Forthcoming, Review of Finance, SAFE Working Paper No. 277, Available at SSRN: https://ssrn.com/abstract=3501549 or http://dx.doi.org/10.2139/ssrn.3501549

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Tobin Hanspal (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Dominique Lammer

affiliation not provided to SSRN

Kevin Rink

Goethe University Frankfurt ( email )

Finance Department
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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