Discussion paper

DP17823 Crypto trading and Bitcoin prices: evidence from a new database of retail adoption

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 mid-2021 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.

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Citation

Auer, R, G Cornelli, S Doerr, J Frost and L Gambacorta (2023), ‘DP17823 Crypto trading and Bitcoin prices: evidence from a new database of retail adoption‘, CEPR Discussion Paper No. 17823. CEPR Press, Paris & London. https://cepr.org/publications/dp17823