Crypto household behavior and experience during COVID-19

Many households struggled both physically and financially during the COVID-19 crisis. In a time of such uncertainty, one might expect households to respond differently to financial instruments considered risker than others. Given the nature and general feelings around cryptocurrency, we expected there might be differences in how households that owned cryptocurrencies fared during the COVID-19 crisis as compared to those that did not own cryptocurrency. Our research found that cryptocurrency-owning households reported fewer financial challenges during the pandemic than households that did not own cryptocurrency. Specifically, they were less likely to experience food insecurity or miss payments on a variety of bills, including medical expenses and utilities. Crypto households experienced less unemployment, as both the head of the household and the partner more readily adapted to working from home. Crypto households were also less likely to experience death from COVID-19 than their counterparts were. Data from the Federal Reserve’s 2022 Survey of Consumer Finances (SCF) reveal that cryptocurrency-owning households in fact fared better than those who did not. The linear probability model results hold after correction for data imputation and controlling for financial literacy, willingness to take risks in the short- and long-term, income, wealth, gender, age, education level, work status, and race. These findings suggest a counternarrative to the mainstream opinion of cryptocurrency owners as risk-loving, irrational, retail day traders. This research contributes to the overall literature by showing households working with cryptocurrency make financially savvy decisions and are better off generally than their counterparts.As cryptocurrency continues to gain traction and assuming it grows at current rates, society will be greatly affected. First, more households may consider expanding their portfolios with cryptocurrency. Assuming this occurs, more individuals and companies will need to become more familiar with this risky asset and other mechanisms through which one can invest in crypto assets, such as exchange-traded funds. Second, cryptocurrency usage is not only increasing among households but businesses too, including public companies. Investors may want to review their other investments, particularly stocks, to see how they may be indirectly invested in cryptocurrency. This consideration may affect other investment motivation considerations in the impact investing space. Last, we demonstrated households had different experiences with the COVID-19 shock event. Individuals may consider cryptocurrency as another asset to diversify in moving forward depending on other potential shock events besides pandemics, such as global or regional recessions or country currency changes in international markets due to political risk.