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The Hong Kong Investment Commission (CIC) utilized the expertise of the Department of Applied Social Sciences at the Hong Kong Polytechnic University last year to understand the complex behaviors of cryptocurrency investors. The resulting study uncovered common thought patterns among Hong Kong’s cryptocurrency investors and laid the groundwork for a more in-depth investigation in the recently published Individual Investor Study 2023.
Investment Decisions of Cryptocurrency Enthusiasts
Findings from PolyU’s study shed light on various cognitive findings that influence the investment decisions of crypto enthusiasts. Among these findings are the availability heuristic, where investors rely on readily available and familiar information, and elements that emphasize past data such as initial offering prices, with a particular focus on overconfidence.
The study also highlights five different emotional states of these cryptocurrency investors, categorizing them as “team building and community following,” “obedience,” “self-experimentation,” “intuitively driving up prices,” and “wishful thinking.”
Driving Forces: The Fundamental Motivations Behind Crypto Investments
CIC’s Individual Investor Study 2023 explores the motivations driving cryptocurrency investments. Approximately three-quarters of the surveyed investors mentioned the pursuit of short-term returns (75%), viewing cryptocurrencies as a trendy investment (74%), and fear of missing out on opportunities (73%).
Despite the majority of investors displaying solid financial knowledge, the study emphasizes the need for continuous improvement and reassessment of financial behavior and attitudes.
Guiding Investors: A Three-Step Investment Process
Regardless of the chosen investment products, the study proposes a rigorous three-stage investment process for investors. The first step advocates for caution in asset preservation. Understanding the characteristics and risks of the chosen product is the second step, which helps investors align their choices with their needs.
The final step calls for investors to regularly review and reflect on their investment behaviors and attitudes, emphasizing cautious investment practices. In an era where cryptocurrencies are gaining importance, findings from comprehensive studies become invaluable tools for both investors and regulatory bodies.
The nuances of investor behavior outlined in these studies, cognitive biases, and motivations significantly contribute to fostering a more informed and resilient investor community. As the environment for cryptocurrency investments continues to evolve, following these insights becomes increasingly important for all stakeholders involved.
