Download This PaperAre Cryptos Different? Evidence from Retail Trading
70 Pages Posted: 8 Dec 2022 Last revised: 26 Jan 2024
Date Written: December 3, 2023
Abstract
Trading in cryptocurrencies grew rapidly over the last decade, dominated by retail investors. Using data from eToro, we show that retail traders are contrarian in stocks and gold, yet the same traders follow a momentum-like strategy in cryptocurrencies. The differences are not explained by individual characteristics, investor composition, inattention, differences in fees, or preference for lottery-like assets. We conjecture that retail investors have a model where cryptocurrency price changes affect the likelihood of future widespread adoption, which leads them to further update their price expectations in the same direction.
Keywords: Cryptocurrencies, FinTech, Retail trading
JEL Classification: G41, G12, G14
Suggested Citation: Suggested Citation
University of Pennsylvania - The Wharton School ( email )
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Antoinette Schoar
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
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