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Cash in the Pocket, Cash in the Cloud: Cash Holdings of Bitcoin Owners

Author

Listed:
  • Daniela Balutel

    (York University and Bank of Canada)

  • Christopher S. Henry

    (Bank of Canada)

  • Kim P. Huynh

    (Bank of Canada)

  • Marcel C. Voia

    (Laboratoire d’Economie d’Orléans and University of Bucharest)

Abstract

Are private digital currencies such as Bitcoin a substitute for physical cash? We test this hypothesis using data from the Bank of Canada’s Bitcoin Omnibus Survey. We estimate the effect of Bitcoin ownership on the level of cash holdings. We find a positive correlation between Bitcoin ownership and cash holdings. This effect remains after accounting for selection into ownership. On average, Bitcoin owners hold 83 percent (in 2018) to 95 percent (in 2017) more cash than non-owners. Quantile regressions find that Bitcoin ownership has a nonlinear effect on cash holdings. The difference varies from 63 percent (25th quantile) to 176 percent (95th quantile) in 2017. Our results provide evidence that Bitcoin adopters also hold cash.

Suggested Citation

  • Daniela Balutel & Christopher S. Henry & Kim P. Huynh & Marcel C. Voia, 2024. "Cash in the Pocket, Cash in the Cloud: Cash Holdings of Bitcoin Owners," International Journal of Central Banking, International Journal of Central Banking, vol. 20(3), pages 115-159, July.
    • Handle: RePEc:ijc:ijcjou:y:2024:q:3:a:3
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    References listed on IDEAS

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    1. Walter Engert & Ben Fung & Björn Segendorf, 2019. "A Tale of Two Countries: Cash Demand in Canada and Sweden," Discussion Papers 2019-7, Bank of Canada.
    2. Fujiki, Hiroshi, 2020. "Who adopts crypto assets in Japan? Evidence from the 2019 financial literacy survey," Journal of the Japanese and International Economies, Elsevier, vol. 58(C).
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    7. Daniela Balutel & Walter Engert & Christopher Henry & Kim Huynh & Marcel Voia, 2022. "Private Digital Cryptoassets as Investment? Bitcoin Ownership and Use in Canada, 2016-2021," Staff Working Papers 22-44, Bank of Canada.
    8. Kim Huynh & Jozsef Molnar & Oleksandr Shcherbakov & Qinghui Yu, 2020. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Staff Working Papers 20-7, Bank of Canada.
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    1. Daniela Balutel & Christopher Henry & Jorge Vásquez & Marcel Voia, 2022. "Bitcoin adoption and beliefs in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(4), pages 1729-1761, November.

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