A world divided: Investors and gamblers meet at the blockchains

Abstract

<p>This chapter covers recent literature and presents new empiric results on owning cryptocurrency and how it relates to gambling problems. Results are based on a longitudinal survey conducted in Finland. First, it conceptually clarifies cryptocurrencies in relation to the history of money, FIAT currencies, assets, and investmentinstruments. Then, cryptocurrencies are investigated in relation to investing, gambling, and pathological trading. Finally, new empirical results regarding similarities and differences between cryptocurrency owners, cryptocurrency traders, traditional investors, and online gamblers are presented. A nationally representative sample of 1,530 respondents was collected in Finland. Follow-up surveys were collected at 6-month intervals. Of the original respondents, 61.05% remained at T5. Questions and validated measures used included owning cryptocurrency, trading at cryptocurrency exchanges such as Binance, visiting online casino sites, the Problem Gambling Severity Index (PGSI), the 5-item Mental Health Inventory, and the 10-item Perceived Stress Scale. At T1, 7.58% of the participants had owned cryptocurrencies and 4.64% owned them currently. General at-risk gambling prevalence as measured by the PGSI was 13.73% between T1 and T5. At-risk gambling prevalence among traditional investors was 16.33%, among online gamblers 25.38%, people who owned cryptocurrency 32.39%, and cryptocurrency traders 43.68% (p < 0.001). A hybrid model examining between-person and within-person effects of financial activities on gambling problems, psychological distress, and stress showed that crypto trading had the strongest within-person effect on gambling problems. However, merely owning cryptocurrencies was associated with a reduced likelihood of experiencing gambling problems as people who bought crypto but did not trade it demonstrated significantly fewer gambling problems than the general population. The results raise specific concerns about cryptocurrency trading, revealing a deep divide between those who acquire crypto to trade it for quick profits, and those who seem to acquire it as a part of a more long-term investment strategy. Our results confirm previous findings that crypto trading is strongly associated with gambling problems but also offer surprising new insight into people who buy crypto with a long-term outlook. Future research should investigate how these two very different populations mingle in the crypto space.</p>