An analysis of investment behaviour in cryptocurrencies in Malta

Abstract

Cryptocurrencies have soared in their popularity in recent years, with social media driving their rise and several hopping on the trend. Cryptocurrencies were initially created as a means of currency without the intermediary element; however, their popularity as an investment instrument has surged. The problem lies when individuals view these assets as an easy way to make profits by putting money into cryptocurrencies and expecting high short-term gains risk free. The study looked into the cryptocurrency sphere in Malta, giving a personality to Maltese cryptocurrency investors by delving into the background of these individuals and their demographics. The research further explored what drives investment behaviour in these cryptocurrencies, while highlighting any herd behaviour trends in these investments. To conduct this study, data was gathered through surveys distributed via social media to Maltese individuals who have invested money in cryptocurrencies. Survey responses totalled 385. The data was then analysed through SPSS software by running several non-parametric tests and a number of regression models thereby identifying the significant factors to be able to address the research objectives. It transpired that the market is mainly dominated by males and young adults aged between 25 and 34 with a strong level of education and an average annual income. Moreover, there are a variety of reasons why individuals seek these investments, with speculation and long-term growth being the most prominent. Herd behaviour was observed in the study as it transpired that many investors would typically copy others. Interestingly, herding also influences gambling behaviour, where individuals who herd often tend to gamble more. Furthermore, individuals who behave in a herd are oblivious to the risks associated with these cryptocurrencies, while investors frequently depend on the views of others when making investment decisions due to a lack of understanding in the field. Having proved evidence of herd behaviour within the Maltese cryptocurrency market, it was possible to arrive at several conclusions, while supporting the conclusions reached by foreign researchers worldwide that market herding makes it highly unlikely that these currencies are accurately valued. Moreover, confirming this behaviour also implies how simple it is to influence someone through social media, even in terms of where to invest their money. Finally, herd behaviour present within this Maltese field implies that other Maltese sectors can and could be experiencing similar behaviour.