The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments
Forthcoming, Review of Finance
77 Pages Posted: 31 Dec 2019 Last revised: 8 Nov 2021
Date Written: December 10, 2019
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: Suggested Citation