Exposure to crypto ‘leads to risks on other investments’, according to new research

One part of the study, led by Yuna Yang, an assistant professor of marketing at UCD, involved giving 430 people a verbal ability survey. They were either given a short article to read about cryptocurrency, which described its benefits and advantages over other currencies, or an article about a completely unrelated subject, in this case the James Webb space telescope.
Afterwards, participants were given a word completion task, having to complete 10 fragments, each missing one letter. One of them was “-uck”, which could be completed as duck, luck, muck, etc.
Those who read the cryptocurrency article were more likely to complete ‘_uck’ as ‘luck’.
In study two, participants answered questions on cryptocurrency and financial behaviour. They then had to choose between two lottery options with the same expected utility – $160. The safer option was an 80pc chance of winning $200 and a 20pc chance of winning nothing, and the riskier alternative was a 20pc chance of winning $800 and an 80pc chance of nothing.
Those who answered cryptocurrency questions first, which were designed to bring the subject to the front of their minds, were more likely to choose the riskier lottery option.
A third part of the study measured the number of news articles published daily related to cryptocurrency, and demands on the markets for riskier stocks and bonds over the last 10 years. A higher daily volume of cryptocurrency-related articles was positively associated with greater junk bond and risky stock demand – a sign that investors are more willing to take financial risks.
Prof Yang said: “We show that information about a certain investment option can shape risk preference for other investment options, particularly for those under low subjective financial wellbeing. This is because such consumers are motivated to perceive cryptocurrency as a lucky investment.”
She did the study alongside colleagues at UCD Smurfit School and the University of Oxford. The authors believe the research will add to our understanding of how cryptocurrency can influence consumer decision making, which in turn has an impact on financial wellbeing.
The findings will be published in the journal Advances in Consumer Research later this year.
Gabriel Makhlouf, the governor of the Central Bank, has repeatedly warned Irish consumers about the risks associated with unbacked crypto. He said backed crypto – such as stablecoins, which are usually supported by cash or government bonds – have the potential to improve the payments system and to offer positive welfare benefits for economies.
Unbacked crypto, which includes bitcoin, is a speculative asset and not a currency, he told the Irish Independent in March. “I am uncertain, ultimately, what its value is. I certainly do think it imposes risks to individual consumers.”