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Cryptocurrency ownership and cognitive biases in perceived financial literacy

Author

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  • Carbó-Valverde, Santiago
  • Cuadros-Solas, Pedro J.
  • Rodríguez-Fernández, Francisco

Abstract

Acknowledging the potential threats posed to financial stability by owning cryptoassets combined with a lack of financial literacy, this paper investigates the relationship between financial literacy and cryptocurrency ownership using machine learning methods. Analyzing 2121 survey responses, it shows that financial literacy emerges as a crucial factor in cryptocurrency ownership, even when accounting for other factors such as age, income, and digital activity. A neural network model reveals that a unit increase in financial literacy reduces the probability of cryptocurrency ownership by 0.2. Causal forest analysis indicates that financial literacy bias positively impacts ownership likelihood (a point estimate of 75.30 %). However, the bias-corrected financial literacy measure has a negative effect of −25.40 % on ownership likelihood. This reveals that cognitive biases, particularly overconfidence, as a significant influence on cryptocurrency ownership. These results show that individuals with more financial literacy and with less biased self-assessments are less likely to hold cryptocurrencies.

Suggested Citation

  • Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2025. "Cryptocurrency ownership and cognitive biases in perceived financial literacy," Journal of Behavioral and Experimental Finance, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:beexfi:v:45:y:2025:i:c:s2214635024001345
    DOI: 10.1016/j.jbef.2024.101019
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    More about this item

    Keywords

    Cryptocurrencies; Financial literacy bias; Machine learning; Digital asset adoption;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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