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Psychological barriers in the cryptocurrency market

Author

Listed:
  • Vítor Fonseca
  • Luís Pacheco
  • Júlio Lobão

Abstract

Purpose - The purpose of this paper is to study the existence of psychological barriers in cryptocurrencies. Design/methodology/approach - To detect psychological barriers, the authors perform a uniformity test, a barrier hump test, a barrier proximity test and conditional effects test to a sample comprised by the daily closing quotes of six of the most liquid cryptocurrencies. Findings - The results evidence the existence of psychological barriers in four of the cryptocurrencies under scrutiny, namely, Bitcoin, Dash, NEM and Ripple. Practical implications - The fact that the cryptocurrency market has a high share of unexperienced investors and presents several cases of psychological barriers is consistent with the hypothesis that that class of investors is particularly prone to the behavioral biases which cause psychological barriers. Originality/value - This paper studies, for the first time, the existence of psychological barriers in the market of cryptocurrencies.

Suggested Citation

  • Vítor Fonseca & Luís Pacheco & Júlio Lobão, 2019. "Psychological barriers in the cryptocurrency market," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 12(2), pages 151-169, August.
    • Handle: RePEc:eme:rbfpps:rbf-03-2019-0041
    DOI: 10.1108/RBF-03-2019-0041
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    Citations

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    Cited by:

    1. Bennett, Donyetta & Mekelburg, Erik & Williams, T.H., 2023. "BeFi meets DeFi: A behavioral finance approach to decentralized finance asset pricing," Research in International Business and Finance, Elsevier, vol. 65(C).
    2. Zdenek Smutny & Zdenek Sulc & Jan Lansky, 2021. "Motivations, Barriers and Risk-Taking When Investing in Cryptocurrencies," Mathematics, MDPI, vol. 9(14), pages 1-22, July.

    More about this item

    Keywords

    Market efficiency; Bitcoin; Psychological barriers; Cryptocurrencies; G14; G15; G41;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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