While blockchain can be employed without using cryptocurrency, the cryptocurrency coins and tokens remain as the main motivation behind deploying blockchain in almost all use-cases. It is unclear however what are the socio-demographic factors and other market factors affecting the choice of investment in various coins and tokens.

Working as a Postdoctoral Research Fellow at the School of Economics and the Australian Institute of Business and Economics, I undertook the following research projects to engage and collaborate with the students with the background in Economics and also to fulfil my curiosity to answer the aforementioned research question.

In these research projects, I applied my discrete choice modeling and time-series knowledge to explore the investment behaviours in this market and the determinants of investment choices.

Behavioural modeling of the choice of investing in “cryptocurrency coins” versus “other ICO tokens (2018)

I defined this research as a summer project for two undergraduate students in Economics and Finance, Dingli Xi and Tim O'Brien.

Using a web-based revealed preference survey among Australian and Chinese cryptocurrency folks, I supervised the students to formulate a discrete choice model to investigate the differences between Australian and Chinese investors, and also to identify the determinants of choices. This is the first study investigating the characteristics of cryptocurrency investors by using inferential statistical models, and the existing articles only provide a number of the descriptive snapshot of online surveys. We investigated 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.

We modeled the choice of investment in three discrete categories (invest up to now, never invest, and invest in future), with regards to the characteristics of the respondents. We also modelled the choice of investing in “cryptocurrency coins” versus “other ICO tokens”.

The results show a difference between Australian and Chinese individual characteristics which are determinant of these choices. Looking at the results, determinants of the choice of investment or the type of investment include age, gender, education, occupation, and experience in other types of investment. Notably, this study finds evidence which aligns well with theories of risk-aversion in behavioral economics and finance.

Highlights of this research are as follows:

• Australian investors at their twenties are more likely to invest in the other startup ICOs rather than coins.

• High-income earners, wholesalers, freelancers, casual workers, and unemployed, and IT people are more likely to invest in coins versus other tokens.

• Being male and having invested in shares and fixed income and freelancing as the significant factors in investing in coins for Chinese investors.

• In Australia, females are more likely to invest in the future or never invest in cryptocurrency.

• Australians who already have or intend to invest in the cryptocurrency have jobs in banking and IT sector.

• Chinese and Australian investors rank the ICO attributes differently

• The deterrence factors, and investment strategies vary between Chinese and Australians.

The findings of this study has been published in the Journal of Alternative Investments, you can download a pre-print here at arxiv, or a full version published here at the Journal of Alternative Investments.

Investor perspective on the factors affecting the cryptocurrency market (2019)

This research was undertaken by Dingli Xi as a Master thesis in the School of Economics, University of Queensland, under my supervision.

This study explored the factors affecting the future of the cryptocurrency by studying investor perspectives on the expected value of the market, using time-series analysis on a historical data from cryptocurrency news websites and twitter activity data.

Overall, five potential factors were examined in this study: security concerns, criminal activity, market transparency, the influence of legislation, and practical applicability. By constructing and testifying as to the relationship between cryptocurrency events, investor discussion, investor sentiment, and the return of Bitcoin, this study discovered that leaving out the aspect of criminal activity, cryptocurrency news coverage on the cryptocurrency event categories of security concerns, market transparency, the influence of legislation, and practical applicability could result in strong and significant corresponding investor discussions. This implies that cryptocurrency news is capable of being used as a representative of cryptocurrency events. Drawing upon the role of cryptocurrency news in the cryptocurrency market, this study further investigated whether the proposed five factors are significant enough to result in any market fluctuations.

Contrary to the findings observed when investigating cryptocurrency news coverage and investor discussion, this study found that investors only react significantly to the cryptocurrency event categories of market transparency. Therefore, it can be concluded that the market transparency is the only factor that investor recognized as significant in affecting the future of cryptocurrency.

The relationship between an epidemic and Bitcoin market: Evidence from the COVID-19 outbreak in China (2020)

On a continuing collaboration with the student in the previous study, we applied time-series analysis to investigate the relationship between Bitcoin prices and active confirmed cases, media coverage, and public attention.

This research confirmed that the COVID-19 in China has had a significant impact on the Bitcoin market. The daily active confirmed cases indicate a clear long-run positive relationship between COVID-19 and the Bitcoin prices. Whereas in the short-run, the impact from the COVID-19 can be both positive and negative. Meanwhile, this research found that media coverage plays an essential role, which creates investor pessimism and lowers the future expectation of Bitcoin prices.

The final outcomes were submitted to IEEE ICBC2021 Conference.