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Investors’ Beliefs and Cryptocurrency Prices

Matteo Benetton & Giovanni Compiani

Review of Asset Pricing Studies2024https://doi.org/10.1093/rapstu/raad015article
AJG 3ABDC A*
Weight
0.75

Abstract

We explore the impact of investors’ beliefs on cryptocurrency demand and prices using new individual-level survey data and a structural characteristics-based demand model with differentiated cryptocurrencies and heterogeneous investors. We show that younger individuals with lower incomes are more optimistic about the future value of cryptocurrencies, as are late investors. We identify the model combining observable beliefs with an instrumental variable strategy that exploits variation in the production of different cryptocurrencies. Counterfactual analyses quantify the impact on portfolio allocations and equilibrium prices of (i) (regulating) entry of late optimistic investors, and (ii) growing concerns among investors about the sustainability of energy-intensive proof-of-work cryptocurrencies. (JEL: D84, G11, G41)

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https://doi.org/https://doi.org/10.1093/rapstu/raad015

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@article{matteo2024,
  title        = {{Investors’ Beliefs and Cryptocurrency Prices}},
  author       = {Matteo Benetton & Giovanni Compiani},
  journal      = {Review of Asset Pricing Studies},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.1093/rapstu/raad015},
}

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Evidence weight

0.75

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.96 × 0.4 = 0.39
M · momentum0.93 × 0.15 = 0.14
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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