A new study on trading activity shows that crypto investors are often seeking thrills. The paper is titled “Are Cryptocurrency Traders Pioneers or Merely Risk Seekers? Evidence from Broker Accounts.” What evidence do the authors present that people investing in cryptocurrencies are motivated by excitement?
Matthias Pelster, Bastian Breitmayer and Tim Hasso conducted the research. It was published in the Journal of Economic Letters in September and contains several revealing facts and figures.
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What is the overall finding?
The researchers focused on people active in equity markets. Their results indicate that these investors tend to take on greater risk once they also begin investing in crypto. The authors argue that such investors are “attracted by thrill-seeking.”
The report finds changes in stock market behavior once investors start allocating to crypto. Specifically, there is “an increase in trading intensity and leverage usage.”
In other words, stock traders alter their behavior simply because they discover cryptocurrencies. That reaction is notable. What exactly do the published numbers show?
More statistics on crypto investors
The study covers the period from early 2014 through the end of 2017 and analyzes data from over 668,000 investors to document trading habits. What conclusions emerge from this large sample?
The authors report that investor behavior shifts within the first 10 days after entering crypto markets. These changes include a 13.4% rise in leverage use. Trades executed on their primary market also increase by 16.8% during that period.
Another notable result: crypto investors aged 35 to 44 experienced the largest leverage increases. The 25 to 34 age group showed the next-largest change.
What does this mean?
Does investing in volatile cryptocurrencies reduce traders’ natural risk aversion, or does it indicate greater openness to new ideas? Perhaps these individuals were already risk-takers, and crypto simply amplified a sense of freedom. Without further qualitative detail, it remains difficult to pinpoint exactly why the two behaviors are linked.
The intrinsic volatility of many cryptocurrencies will likely continue to attract risk-seeking traders. At the same time, the emergence of fiat-backed stablecoins and commodity-backed tokens could alter market dynamics going forward.
As more traditional investors consider digital assets, stablecoins such as Tether and initiatives tied to mainstream platforms may draw participation from those who do not seek outsized returns in a highly volatile market. In short, broader asset options could diversify who participates in crypto investing.