Are Cryptos Different? Evidence from Retail Trading / Shimon Kogan, Igor Makarov, Marina Niessner, Antoinette Schoar.

Format:

Book

Author/Creator:

Kogan, Shimon.

Contributor:

National Bureau of Economic Research.

Makarov, Igor.

Niessner, Marina.

Schoar, Antoinette.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31317.

NBER working paper series no. w31317

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Trading in cryptocurrencies has grown rapidly over the last decade, primarily dominated by retail investors. Using a dataset of 200,000 retail traders from eToro, we show that they have a different model of the underlying price dynamics in cryptocurrencies relative to other assets. Retail traders in our sample are contrarian in stocks and gold, yet the same traders follow a momentum-like strategy in cryptocurrencies. Individual characteristics do not explain the differences in how people trade cryptocurrencies versus stocks, suggesting that our results are orthogonal to differences in investor composition or clientele effects. Furthermore, our findings are not explained by inattention, differences in fees, or preference for lotterylike stocks. We conjecture that retail investors hold a model of cryptocurrency prices, where price changes imply a change in the likelihood of future widespread adoption, which in turn pushes asset prices further in the same direction.

Notes:

Print version record

June 2023.