Practical Applications of Investigating the Investment Behaviors in Cryptocurrency

Practical Applications

In Investigating the Investment Behaviors in Cryptocurrency from the Fall 2020 issue of The Journal of Alternative Investments, authors Dingli Xi, Timothy Ian O’Brie, and Elnaz Irannezhad (all of the University of Queensland in St. Lucia, Australia) investigate who is likely to invest in cryptocurrency initial coin offerings (ICOs). ICOs constitute an innovative way to raise capital for business startups and other projects—but are also very high-risk propositions for investors. Most ICOs are scams, with only 4% successfully raising money for projects. This massive fraud and the regulatory crackdowns in response to it have made ICO fundraising much more difficult.

Those who wish to raise funds via ICOs therefore need better knowledge of their target investor market. The authors surveyed ICO investors to assess who invests in ICOs and what factors encourage or discourage ICO investing. They found ICO investors tend to be male, affluent, better educated, and working in banking or IT—while women, business owners, educators, and stock market investors are less likely to invest in ICOs. Financial professionals can use these and the authors’ other findings to help advise businesses and organizations about how to market their ICOs.