A recent study finds that people who search for the thrill are the main portion of investors on the Crypto markets. Read ahead to find out more.
According to a recent study, traders taking significant risks on the market tend to seek dopamine. The article titled “Are Cryptocurrency Traders Pioneers Or Just Risk-Seekers? Evidence from Brokerage Accounts” elaborates on the Crypto traders and their excitement-seeking behavior. A major takeaway states:
“We find that when engaging in Cryptocurrency trading investors simultaneously increase their risk-seeking behavior in stock trading as they increase their trading intensity and use of leverage”.
The researchers behind the study, Matthias Pelster from the University of Paderborn, Bastian Breitmayer of Queensland University of Technology, and Bond University’s Tim Hasso, used brokerage information in order to track the influence of Crypto trading on the behavior. The study shows most traders make 16.8 stock trades and increase the leverage size by 13.4% in the first 10 days after starting their Crypto trading. The sample group reporting such behavior is aged between 35 and 44 years old, and the second one varies between 25 and 34.
This behavior can be explained with the higher Crypto prices volatility in comparison to stocks. Let’s say Bitcoin makes a huge correction worth more than $1,000 in just a few minutes which will be definitely an extremely emotional and intense experience to every Crypto trader. Uncertainty is very likely within Cryptocurrencies and compared to stocks, this can be seen as another trigger. For instance, SEC can reject just about any Bitcoin exchange-traded fund.
Surprisingly, the research also found that risk-seeking can be correlated with the low volatility of Crypto returns. That completely rejects the fact that Bitcoin can be seen as a safe heaven for Crypto. But why would traders speculate on Crypto price movements, if they thought it’s safe and considered a long-term opportunity for stable income?