Thought of the Week - Why do people invest in cryptocurrencies?

No matter whether you are a fan of cryptocurrencies or not, they are here to stay and more and more investors are buying some. Some people argue that cryptocurrencies are the new gold for the digital age, while others look at it as a purely speculative trade. But I have a hard time finding any good systematic data on what drives people to invest in Bitcoin or Ethereum.

Joachim Thought Of The Week

Luckily, Tatja Kärkäinen from the University of Glasgow looked at a survey done by the OECD amongst several thousand people in South East Asia and systematically explored their motivations for holding cryptocurrencies. I know a survey amongst South East Asian investors may not be representative of investors in Western Europe or North America, but I don’t know of any objective survey (i.e. mot sponsored by a firm that is involved in the crypto business) on the subject, so I take what I can get. If any of my readers have some good survey data, please send it to me or point me in the right direction, so I can write about it here for the benefit of us all.

But with these limitations in mind, the results of the survey from the OECD are interesting. Cryptocurrencies are clearly an investment that attracts people who are more tech-affine and have a higher knowledge of modern technology. People with a higher tech literacy are 9% more likely to own cryptocurrencies. This probably also explains why men are more likely to own cryptocurrencies since men tend to be more interested in technology.

Similarly, people who receive advice from a professional (e.g. a financial adviser) are 15% more likely to own cryptocurrencies. I think this points to the fact that there is a hurdle to overcome before investors buy cryptocurrencies and this hurdle is the need to understand (at least to some degree) what cryptocurrencies do and how they work.

Interestingly, though, one of the biggest drivers for the ownership of cryptocurrencies is the fear of missing out. Among people in the top 60% of income (i.e. people who are not so poor that they cannot save anything), the fear of missing out makes them 25% more likely to own cryptocurrencies. But if that sounds alarming, my guess is that for other asset classes like equities we would get a similar result. And in any case, separate questions on the motivation to own cryptocurrencies showed no significant effect of owning cryptos for fun or as a gamble for a quick profit. Instead, the only motivational effect that has a significant effect on crypto ownership is a desire to save for retirement.

In essence, then, people buy into cryptocurrencies once they start to understand the technology and know people around them who have invested as well. But once they hold these assets, they don’t hold them for speculation but as a store of value.


Thought of the Week features investment-related and economics-related musings that don’t necessarily have anything to do with current markets. They are designed to take a step back and think about the world a little bit differently. Feel free to share these thoughts with your colleagues whenever you find them interesting. If you have colleagues who would like to receive this publication please ask them to send an email to This publication is free for everyone.

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