Buy, buy, bye! The role of learning and beliefs in exiting from the Bitcoin market

Daniela Balutel
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Daniela Balutel: National Bank of Moldova

Carpathian Stata Conference 2026 from Stata Users Group

Abstract: I build and test a theoretical model of Bitcoin adoption and unadoption in which beliefs about Bitcoin’s long-run survival and heterogeneous learning rates drive entry, exit, and reentry decisions. The model implies ranked belief distributions across never owners, owners, and past owners and describes how these distributions and the associated ownership shares evolve over time. Using 2017–2019 data from the Bank of Canada’s Bitcoin Omnibus Survey and a sequential logit model with control functions, the empirical belief distributions, which are a key determinant of both entry and exit, align with the model: owners are the most optimistic, never owners the most pessimistic, and past owners lie in between, with past owners becoming more optimistic over time. A composite cryptofinancial literacy (CFL) index plays a context-dependent role, because high-CFL individuals are less likely to exit during downturns but more likely to exit when market conditions improve, while medium- and low-CFL individuals are less likely to enter yet more inclined to exit. Counterfactual simulations that shift the population distribution of CFL upward show that higher CFL increases both current and past ownership, especially among respondents with strong survival beliefs, highlighting a complementarity between literacy and optimism in shaping the Bitcoin adoption lifecycle.

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Persistent link: https://EconPapers.repec.org/RePEc:boc:carp26:05

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