Who owns cryptocurrencies and why?

Who owns cryptocurrencies and why?

Tatja Kärkäinen from the University of Glasgow looked at a survey done by the OECD amongst several thousand people in Southeast Asia and systematically explored their motivations for holding cryptocurrencies. Investors in cryptocurrencies are tech-affine and interested in modern technology. Crypto owners are more of financially literate and more certain about their income. They employ high research when investing and have greater time horizon than non-crypto owners. Moreover, the saving motive for crypto owners is more to protect against emergency and rainy days and less of speculative motives. Furthermore, household with greater risk tolerance are more likely to invest in crypto asset. The only asset class that increases the propensity to own crypto asset is direct ownership of stocks. However, one of the biggest drivers for the ownership of cryptocurrencies is the Fear of Missing Out (FOMO).

FOMO in Digital Assets

The FOMO sentiment explains the motivation for retail investors to own Initial Coin Offerings (ICOs). When FOMO is interacted with wealth, their explanatory effect of ICO ownership is high at 25%. In addition, the study finds that ICO investors are also motivated by long-term. ICOs can be classified as digital- or crypto assets and ICOs can be differentiated from cryptocurrencies by classifying them as investable tokens issued by small companies that can bought using cryptocurrency or fiat money. Specifically, Bitcoin and crypto in general are the product of a system governed by technology, furthermore, crypto is finite and unique.

Portfolio Choice of Crypto Asset Class

Altogether, investors in cryptocurrencies are much more long-term oriented and sophisticated. Overconfidence and home biased crypto owners are less investing in crypto, whereas crypto owners who employ large deal of research do invest more in crypto assets. In total, once crypto owners hold cryptocurrencies, they don’t hold them for speculation but as a store of value. As a result, owners of cryptocurrencies had a substantially longer investment horizon than investors who did not own cryptos.