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Are cryptos different? Evidence from retail trading

Author

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  • Kogana, Shimon
  • Makarov, Igor
  • Niessnerc, Marina
  • Schoar, Antoinette

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.

Suggested Citation

  • Kogana, Shimon & Makarov, Igor & Niessnerc, Marina & Schoar, Antoinette, 2024. "Are cryptos different? Evidence from retail trading," LSE Research Online Documents on Economics 122266, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122266
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    File URL: http://eprints.lse.ac.uk/122266/
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    References listed on IDEAS

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    More about this item

    Keywords

    cryptocurrencies; FinTech; retail trading; social finance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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    This paper has been announced in the following NEP Reports:

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