The global cryptocurrency market is worth over USD$2 trillion. In five years, some cryptocurrencies like Bitcoin have seen their price jump by over 8000% (Coinmarketcap.com 2021)1. These digital currencies use cryptography and blockchain technology. They are traded online through a network that records transactions on a public blockchain. This is different from traditional currencies issued by governments2.
Now, stablecoins are more popular than ever in the crypto world. Cryptocurrency has also become a key issue in the Russian invasion of Ukraine. Russian actors are using it for funding and secret deals2.
At first, cryptocurrencies seem like a way to make money from risk. But, this research looks into how the Dark Tetrad affects crypto decisions. It also tries to figure out why people invest in crypto1. The study looked at 138 papers on the crypto market, with 2019 being the busiest year for research and findings1.
But, these currencies can have very high price swings. This makes trading them a bit like gambling3. Most central banks are checking out the idea of CBDCs. About 60% are testing CBDC tech, and 14% are starting pilot projects3.
Key Takeaways
- The global cryptocurrency market has a total value of over $2 trillion, with Bitcoin increasing in price by over 8000% in five years.
- Cryptocurrencies are digital currencies based on cryptography and blockchain technology, traded on the internet through a peer-to-peer network.
- Cryptocurrency investment offers potential capital gain from speculative risk, but also carries extreme price volatility, making it akin to gambling.
- The present research examines the effects of the Dark Tetrad on crypto judgments, as the drivers of why people buy crypto are not well known.
- Central banks are actively researching, experimenting, and deploying pilot projects for central bank digital currencies (CBDCs).
Understanding Cryptocurrencies and Their Volatility
Cryptocurrencies, also known as “crypto,” are digital money that use cryptography and blockchain for safe, decentralized transactions4. They aim to change industries like finance and law with their new technology4.
What are Cryptocurrencies?
Cryptocurrencies have many benefits, like cheaper and quicker money transfers and decentralized systems4. They are digital coins that can be traded or used as money, just like regular money5. But, they’re not made or controlled by any government, making them different from traditional money4.
There are many kinds of cryptocurrencies, like utility tokens (e.g., XRP, ETH), transaction tokens (e.g., Bitcoin), and more4. People can buy them on exchanges and keep them in digital wallets or use services like Robinhood for crypto ETFs4.
The Extreme Price Volatility of Cryptocurrencies
Cryptocurrencies can have huge price swings, making them risky investments4. For example, Bitcoin’s price went from $60,000 to around $17,000 in 20226. This makes some see trading crypto as more like gambling4.
Some people find the risk and freedom of cryptocurrencies appealing, especially if they like gambling or don’t trust government oversight4. The ups and downs of crypto, along with its independence from traditional finance, draw in investors4.
“Cryptocurrencies are prone to price swings, use a lot of energy for mining, and can be linked to crime.”4
Even with the risks, the chance for big rewards and the decentralized nature of cryptocurrencies keep attracting investors and fans4. As crypto continues to grow, knowing about its unique traits and volatility is key for smart investing4.
Potential Drivers of Cryptocurrency Investment
Investing in cryptocurrency has several reasons why people might choose it. The chance of big gains makes it attractive for those looking for high-risk investments7. Yet, the risk of losing money due to hacking is higher than with stocks7. Still, many are drawn to the possibility of making a lot of money in this unpredictable market.
Speculative Risk and Potential Gains
Cryptocurrency investments are seen as speculative, offering big returns but also big risks. Digital assets like Bitcoin and Ethereum have seen huge price jumps over time7. Big companies like Block and PayPal now make it easy to buy and sell cryptocurrency7. This ease of access and growing popularity make it more appealing for those after big gains.
Decentralization and Autonomy from Government Oversight
Cryptocurrencies stand out for being decentralized and free from government control7. By late 2021, MicroStrategy had invested $5.7 billion in Bitcoin and plans to invest more7. This freedom from traditional financial systems and government rules is a big draw for those wary of authority and wanting more control over their money.
Also, the low link between cryptocurrency prices and other financial assets like stocks and bonds makes it a good way to diversify a portfolio8. This can attract investors wanting to spread out their investments and protect against market ups and downs.
Moreover, the clear and secure nature of cryptocurrency transactions, thanks to blockchain, adds to its appeal8. These transactions are quick to complete and cheaper than traditional banking8. This speed and cost-effectiveness are big pluses for investors looking for quick and affordable financial options.
In summary, the mix of potential for big gains, decentralization, and freedom from government oversight makes cryptocurrency an interesting choice for investors9. But, it’s crucial to remember that the market is very volatile. Investors should do their homework and be careful before jumping into it9.
The Dark Tetrad and Cryptocurrency Investment
Cryptocurrency investing is getting more popular, with a market value over $2 trillion1011. Research links certain traits, known as the “Dark Tetrad,” to how people invest in cryptocurrencies.
Machiavellianism and Cryptocurrency Judgments
Machiavellians aim to get what they want by being manipulative and strategic. They’re cautious with money, avoiding quick, risky moves10. But, the chance for big gains in crypto might tempt them because they love money and aim for rewards10.
Studies show a link between Machiavellianism and taking financial risks (r = 0.25)10. They also find a strong link with believing in government conspiracies (r = 0.67)10. Plus, Machiavellians feel the Fear of Missing Out (FoMO) strongly (r = 0.32)10. This might draw them to crypto investment for its potential profits.
Narcissism and Risky Crypto Investment
Narcissists feel very important and love to show off. They’re often into risky investments, including the stock market10. This risk-taking might also apply to cryptocurrencies. Their belief in their skills and love for excitement could push them towards riskier crypto investments10.
Research shows narcissism affects conspiracy beliefs a lot (4% to 4.9% of the variance)10. This might make narcissists more interested in the mysterious crypto world.
People with traits like Machiavellianism and narcissism might be attracted to crypto for its risks and rewards. Their nature makes them more likely to be drawn to the crypto market101112.
Not all crypto investors have these traits, and the research focuses on a specific group12. Still, knowing how the Dark Tetrad affects crypto investment can help investors, advisors, and policymakers101112.
Mediators Underlying Dark Tetrad Effects
Research has found some interesting links between the Dark Tetrad traits and crypto investment. One key link is conspiracy beliefs. People with Machiavellian traits, known for being cunning, often believe in government conspiracies10. They also tend to distrust others and think more about conspiracy theories10.
Narcissism is also linked to believing in conspiracies11. This means people with narcissistic traits might easily fall for conspiracy theories. These beliefs can affect how they invest in cryptocurrencies11.
Conspiracy Beliefs and Crypto Investment
Machiavellian traits and conspiracy beliefs play a big role in crypto investment11. People who don’t trust government agencies might see cryptocurrencies as a better option. This could push them to invest in these digital assets11.
Fear of Missing Out (FoMO) and Crypto Trading
FoMO, or the fear of missing out, is another key factor in the Dark Tetrad and crypto investment13. It’s the worry that others are having fun or making money without you13. In crypto trading, where prices can change fast, this fear can be very strong13.
People with Machiavellian and narcissistic traits are more likely to feel FoMO11. They might trade more often and take bigger risks to not miss out on crypto gains11.
Understanding these factors helps us see how the Dark Tetrad affects crypto investment and trading. Conspiracy beliefs and FoMO are key in shaping the choices and risks of crypto market participants131011.
Is It Worth Investing in Cryptocurrency? Risks and Rewards
Investing in cryptocurrency can be risky and rewarding at the same time. Early investors in successful coins have seen huge gains14. But, the market is very volatile, with values changing quickly14.
Cryptocurrency investments can be tempting, especially for those with certain traits. Coins with strong communities and less government control are appealing14. For instance, Ethereum’s value went from $0.30 to over $4,00014. Axie Infinity’s AXS token and Solana also saw big increases in value14.
But, crypto trading is risky, like gambling. Bitcoin’s value changed a lot, going up by 60% in 2021 and then down by 70% in 202215. The lack of rules makes the market unpredictable and hard for investors15.
Investors need to think about the risks and rewards of cryptocurrency. The low fees and decentralization are good points, but so are the security risks and legal issues15. People should check their risk tolerance and goals before investing15.
In conclusion, investing in cryptocurrency is risky but can also be rewarding. It’s important to look at the risks, challenges, and potential gains. By understanding these, investors can make better choices in the crypto market141516.
Research Limitations and Future Directions
This study had some limits that need to be considered. It was a study that looked at relationships but couldn’t show cause and effect. An experiment could have done that17. Also, adding measures of attitudes or plans towards other investments could have given us more insight17.
Future studies could look into more factors, like envy, to understand why some people are drawn to trading cryptocurrencies17. They could also see if these traits lead to good or bad feelings towards others’ success in trading17.
The world of crypto has grown a lot, with 10% of private investors getting into crypto17 and 55% of Bitcoin investors starting in 202117. But, the market has seen a lot of ups and downs, with a big jump in Bitcoin price making more people invest17. Now, there are many more cryptocurrencies out there, making them a choice for diversifying a portfolio, even though they are risky17.
Sweden is a good place to study crypto investments because of its digital setup and friendly views on crypto17. Also, more institutions and governments are showing interest in digital currencies17. This research shows we still don’t fully understand what makes people choose to invest in cryptocurrencies. Future studies should look into this more.
“The crypto world has grown a lot, attracting many investors with its huge market size and thousands of coins. But, it has faced big challenges, like a big drop in value in 2022, and problems with too many choices and high fees.”
Even though crypto claims to be decentralized, new central groups have become important, and DeFi doesn’t really support real economic activities but increases known risks, putting retail investors at big risk18.
The study also pointed out the hardship in India due to unclear laws on cryptocurrencies, making it tough for users and businesses19. But, the Indian government is working hard to make strong rules for cryptocurrencies19.
This study gives us important insights into how certain personality traits affect crypto investment choices. It also shows the limits of the study and the need for more research to fully understand this fast-changing market.
Conclusion
Cryptocurrencies have grown fast and many people are studying why they’re so popular. This research looks at how certain personality traits push some people towards these digital assets. Traits like Machiavellianism and narcissism make some people more likely to invest in things like Bitcoin20.
Not all who invest in crypto have these traits, but knowing about them helps us. It helps us teach people to invest wisely in this changing market. With over 10,000 types of cryptocurrencies out there20, and their values changing a lot21, it’s key to be careful and know the risks.
This study shows how crucial it is to make the crypto market more open and honest. By understanding what drives people to invest, we can help them make better choices. This way, we can help the crypto world grow in a responsible way22.
FAQ
What are cryptocurrencies?
What is the current state of the cryptocurrency market?
Why are cryptocurrencies considered high-risk investments?
What are the potential rewards of investing in cryptocurrencies?
What is the appeal of cryptocurrencies’ decentralization and autonomy from government oversight?
How do personality traits like Machiavellianism and narcissism relate to cryptocurrency investment?
How do conspiracy beliefs and fear of missing out (FoMO) influence cryptocurrency investment?
What are the key risks and rewards to consider when investing in cryptocurrencies?
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