Are Cryptos Different? Evidence from Retail Trading

70 Pages Posted: 8 Dec 2022 Last revised: 26 Jan 2024

See all articles by Shimon Kogan

Shimon Kogan

Reichman University - Arison School of Business; University of Pennsylvania - The Wharton School

Igor Makarov

London School of Economics & Political Science

Marina Niessner

Indiana University - Kelley School of Business - Department of Finance

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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

Kogan, Shimon and Makarov, Igor and Niessner, Marina and Schoar, Antoinette, Are Cryptos Different? Evidence from Retail Trading (December 3, 2023). Available at SSRN: https://ssrn.com/abstract=4289513 or http://dx.doi.org/10.2139/ssrn.4289513

Shimon Kogan

Reichman University - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Igor Makarov

London School of Economics & Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Marina Niessner (Contact Author)

Indiana University - Kelley School of Business - Department of Finance

1309 E. 10th St
Bloomington, IN 47405
United States

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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