Margin Trading and Cryptocurrency Investment Among U.S. Investors: Evidence from the National Financial Capability Study

Ferdous Ahmmed (), Boakye Yam Boadi and Michael Guillemette
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Ferdous Ahmmed: Department of Finance, Economics, and Risk Management, Missouri State University, Springfield, MO 65897, USA
Boakye Yam Boadi: School of Financial Planning, Texas Tech University, Lubbock, TX 79409, USA
Michael Guillemette: School of Financial Planning, Texas Tech University, Lubbock, TX 79409, USA

JRFM, 2025, vol. 18, issue 7, 1-24

Abstract: This study examined the relationship between margin trading and cryptocurrency investment using data from the 2018 and 2021 waves of the National Financial Capability Study (NFCS) Investor Survey. Guided by behavioral finance theory, which suggests that cognitive biases may influence risk-taking, the study explored whether margin loan use and margin calls are associated with higher cryptocurrency participation. Margin loans are inherently risky, as they must be repaid regardless of investment outcomes, and margin calls are triggered when an investor’s equity falls below a required threshold. The results showed a positive and statistically significant association between margin activity and cryptocurrency investment. Specifically, individuals with a margin loan were 17 percentage points more likely to invest in cryptocurrency, while those who have experienced a margin call were 23 percentage points more likely. Given the extreme volatility of cryptocurrencies, these results highlight the increased risks investors face when using leverage in speculative markets. The analysis is based on cross-sectional data from U.S. investors; therefore, the findings should be interpreted as correlational rather than causal.

Keywords: cryptocurrency investment; margin trading; risk-taking behavior (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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