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, The Bank of International Settlements has assembled a novel database (made available with this paper) on retail use of crypto exchange apps at the daily frequency for 95 countries over 2015–22. The authors 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, BIS exploits 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.