Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271910 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10266
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Prices for cryptocurrencies have undergone multiple boom-bust cycles, together with ongoing entry by retail investors. To investigate the drivers of crypto adoption, we assemble a novel database (made available with this paper) on retail use of crypto exchange apps at daily frequency for 95 countries over 2015–22. We show that a rising Bitcoin price is followed by the entry of new users. About 40% of these new users are men under 35, commonly identified as the most "risk-seeking" segment of the population. We confirm these findings by exploiting two exogenous price shocks: the crackdown of Chinese authorities on crypto mining in mid-2021 and the social unrest in Kazakhstan in early 2022. Moreover, we find that when prices rise retail investors buy, while the largest holders sell – making a return at the smaller users' expense. Overall, back of the envelope calculations suggest that around three-quarters of users have lost money on their Bitcoin investments.
Subjects: 
Bitcoin
cryptocurrencies
cryptoassets
regulation
decentralised finance
DeFi
retail investment
JEL: 
E42
E51
E58
F31
G28
L50
O32
Document Type: 
Working Paper
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