Working Paper: NBER ID: w31284
Authors: Michael Weber; Bernardo Candia; Olivier Coibion; Yuriy Gorodnichenko
Abstract: Using repeated large-scale surveys of U.S. households, we study the cryptocurrency investment decisions and motives of households relative to other financial assets. Cryptocurrency holders tend to be young, white, male and more libertarian relative to non-crypto holders. They expect much higher rates of returns for crypto and perceive it as relatively safer than do other households. They also view it as a better hedge against inflation. For those holding cryptocurrencies, changes in Bitcoin prices translate into their purchases of durable goods. Finally, exogenously-provided information about historical returns of cryptocurrencies leads individuals to increase their desired crypto holdings and makes them more likely to actually purchase cryptocurrency subsequently. We compare these views and behaviors to those of households toward other financial assets and argue that cryptocurrency is unique in many of these respects.
Keywords: Cryptocurrency; Household Finance; Investment Decisions; Financial Assets
JEL Codes: D8; E4; G5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected return perceived by crypto holders (G13) | cryptocurrency ownership (E42) |
| demographic factors (J11) | cryptocurrency ownership (E42) |
| bitcoin prices (G13) | spending decisions on durable goods (E20) |
| information about historical returns (G12) | desired cryptocurrency holdings (E42) |