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Where is the risk? How cryptocurrency investment relates to undesirable financial behaviors

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  • Bai, Zefeng
  • Wang, Pengcheng
  • Xue, Botong

Abstract

This paper investigates how cryptocurrency investment is associated with three undesirable financial behaviors: late mortgage payment, credit card misuse, and retirement borrowing. Drawing on Behavioral Portfolio Theory (BPT), we propose that cryptocurrency’s unique features encourage a “mental account invasion”, where investors engage in behaviors that build the aspirational layer at the expense of the protection layer. Utilizing 2018 and 2021 NFCS data, we find that cryptocurrency investment is associated with an increased likelihood of all three undesirable financial behaviors. Findings are robust to propensity score matching (PSM) and an instrumental variable (IV) design. Furthermore, we find that the observed association is more pronounced among social media users. Overall, our paper documents the potential adverse financial outcomes of crypto investments at the consumer behavior level, providing a novel perspective that contrasts with the predominantly optimistic market narrative about digital assets.

Suggested Citation

  • Bai, Zefeng & Wang, Pengcheng & Xue, Botong, 2026. "Where is the risk? How cryptocurrency investment relates to undesirable financial behaviors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:beexfi:v:49:y:2026:i:c:s2214635026000110
    DOI: 10.1016/j.jbef.2026.101149
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