The Effects of Hype and Social Preferences on Crypto Investing

Using a survey and a pre-registered experiment, we provide evidence on the role of hype and social preferences on crypto investing. Our survey shows that crypto investors are more likely to be influenced by hype and exhibit lower social preferences. Our experiment helps us establish causal relationships: the hype treatment (i.e., information on the number of investors becoming millionaires daily through Bitcoin investing) increases the amount invested in crypto, with evidence consistent with higher expected returns playing a role, whereas the social treatments (i.e., information on crypto’s environmental impact and association with illegal activities) reduce the investment amount without altering financial expectations. Overall, our study helps to understand what encourages and hampers crypto investing.