Cryptocurrency ownership and cognitive biases in perceived financial literacy

Santiago Carbó-Valverde, Pedro J. Cuadros-Solas and Francisco Rodríguez-Fernández

Journal of Behavioral and Experimental Finance, 2025, vol. 45, issue C

Abstract: Acknowledging the potential threats posed to financial stability by owning cryptoassets combined with a lack of financial literacy, this paper investigates the relationship between financial literacy and cryptocurrency ownership using machine learning methods. Analyzing 2121 survey responses, it shows that financial literacy emerges as a crucial factor in cryptocurrency ownership, even when accounting for other factors such as age, income, and digital activity. A neural network model reveals that a unit increase in financial literacy reduces the probability of cryptocurrency ownership by 0.2. Causal forest analysis indicates that financial literacy bias positively impacts ownership likelihood (a point estimate of 75.30 %). However, the bias-corrected financial literacy measure has a negative effect of −25.40 % on ownership likelihood. This reveals that cognitive biases, particularly overconfidence, as a significant influence on cryptocurrency ownership. These results show that individuals with more financial literacy and with less biased self-assessments are less likely to hold cryptocurrencies.

Keywords: Cryptocurrencies; Financial literacy bias; Machine learning; Digital asset adoption (search for similar items in EconPapers)
JEL-codes: G21 G24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:45:y:2025:i:c:s2214635024001345

DOI: 10.1016/j.jbef.2024.101019

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