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The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments
[The investor in structured retail products: advice driven or gambling oriented]

Author

Listed:
  • Andreas Hackethal
  • Tobin Hanspal
  • Dominique M Lammer
  • Kevin Rink

Abstract

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 toward 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.

Suggested Citation

  • Andreas Hackethal & Tobin Hanspal & Dominique M Lammer & Kevin Rink, 2022. "The Characteristics and Portfolio Behavior of Bitcoin Investors: Evidence from Indirect Cryptocurrency Investments [The investor in structured retail products: advice driven or gambling oriented]," Review of Finance, European Finance Association, vol. 26(4), pages 855-898.
    • Handle: RePEc:oup:revfin:v:26:y:2022:i:4:p:855-898.
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    Cited by:

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    2. Michael Weber & Bernardo Candia & Olivier Coibion & Yuriy Gorodnichenko, 2023. "Do You Even Crypto, Bro? Cryptocurrencies in Household Finance," NBER Working Papers 31284, National Bureau of Economic Research, Inc.
    3. Markus Dertwinkel-Kalt & Johannes Kasinger & Dmitrij Schneider, 2024. "Skewness Preferences: Evidence from Online Poker," CESifo Working Paper Series 10977, CESifo.
    4. Colombo, Jéfferson Augusto & Yarovaya, Larisa, 2024. "Are crypto and non-crypto investors alike? Evidence from a comprehensive survey in Brazil," Technology in Society, Elsevier, vol. 76(C).
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    6. Chiara Oldani & Giovanni S. F. Bruno & Marcello Signorelli, 2024. "Economic policy uncertainty and cryptocurrencies," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(3), pages 709-728, September.
    7. Simona-Vasilica Oprea & Irina Alexandra Georgescu & Adela Bâra, 2024. "Is Bitcoin ready to be a widespread payment method? Using price volatility and setting strategies for merchants," Electronic Commerce Research, Springer, vol. 24(2), pages 1267-1305, June.
    8. Shaen Corbet & Yang Hou & Yang Hu & Les Oxley, 2024. "Time varying risk aversion and its connectedness: evidence from cryptocurrencies," Annals of Operations Research, Springer, vol. 338(2), pages 879-923, July.
    9. Shaen Corbet & Les Oxley, 2023. "Investigating the Academic Response to Cryptocurrencies: Insights from Research Diversification as Separated by Journal Ranking," Review of Corporate Finance, now publishers, vol. 3(4), pages 487-528, September.
    10. Dunbar, Kwamie & Owusu-Amoako, Johnson, 2023. "Predictability of crypto returns: The impact of trading behavior," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    11. Kevin Rink, 2023. "The predictive ability of technical trading rules: an empirical analysis of developed and emerging equity markets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(4), pages 403-456, December.
    12. Wang, Jying-Nan & Liu, Hung-Chun & Lee, Yen-Hsien & Hsu, Yuan-Teng, 2023. "FoMO in the Bitcoin market: Revisiting and factors," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 244-253.

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    More about this item

    Keywords

    Bitcoin; cryptocurrencies; structured retail products; retail investors; household finance; investor behavior;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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