Template-Type: ReDIF-Paper 1.0
Author-Name: Raphael Auer
Author-X-Name-First: Raphael
Author-X-Name-Last: Auer
Author-Name: Giulio Cornelli
Author-X-Name-First: Giulio
Author-X-Name-Last: Cornelli 
Author-Name: Sebastian Doerr
Author-X-Name-First: Sebastian 
Author-X-Name-Last: Doerr
Author-Name: Jon Frost 
Author-X-Name-First: Jon
Author-X-Name-Last: Frost  
Author-Name: Leonardo Gambacorta 
Author-X-Name-First: Leonardo
Author-X-Name-Last: Gambacorta 
Title: Crypto trading and Bitcoin prices: evidence from a new database of retail adoption
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. To establish a causal effect of prices on adoption, we exploit two exogenous shocks: the crackdown of Chinese authorities on crypto mining in mid2021 and the social unrest in Kazakhstan in early 2022. During both episodes price changes have a significant effect on the entry of new users. Results from a PVAR model corroborate these findings. Overall, back of the envelope calculations suggest that around three-quarters of users have lost money on their Bitcoin investments.
Length: 28 pages
Creation-Date: 2022-11
File-URL: https://www.bis.org/publ/work1049.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1049.htm
File-Format: text/html
Number: 1049
Keywords: bitcoin, cryptocurrencies, cryptoassets, regulation, decentralised finance, DeFi, retail investment.
Classification-JEL: E42, E51, E58, F31, G28, L50, O32.
Handle: RePEc:bis:biswps:1049