Crypto household behavior and experience during COVID-19

Abstract

Many households struggled both physically and financially during the COVID-19 crisis. In a time of such uncertainty, one might expect households to respond differently to financial instruments considered risker than others. Given the nature and general feelings around cryptocurrency, we expected there might be differences in how households that owned cryptocurrencies fared during the COVID-19 crisis as compared to those that did not own cryptocurrency. Our research found that cryptocurrency-owning households reported fewer financial challenges during the pandemic than households that did not own cryptocurrency. Specifically, they were less likely to experience food insecurity or miss payments on a variety of bills, including medical expenses and utilities. Crypto households experienced less unemployment, as both the head of the household and the partner more readily adapted to working from home. Crypto households were also less likely to experience death from COVID-19 than their counterparts were. Data from the Federal Reserve’s 2022 Survey of Consumer Finances (SCF) reveal that cryptocurrency-owning households in fact fared better than those who did not. The linear probability model results hold after correction for data imputation and controlling for financial literacy, willingness to take risks in the short- and long-term, income, wealth, gender, age, education level, work status, and race. These findings suggest a counternarrative to the mainstream opinion of cryptocurrency owners as risk-loving, irrational, retail day traders. This research contributes to the overall literature by showing households working with cryptocurrency make financially savvy decisions and are better off generally than their counterparts.

Keywords

• Cryptocurrency
• COVID-19
• retail investors
• risk
• Finance
• Economics