Cryptocurrency Investing : Stimulus Checks and Inflation Expectations

We provide a first look into retail cryptocurrency investing by observing cryptocurrency purchases and sales into and out of user bank accounts for millions of U.S. individuals. We document the skyrocketing interest of new investors for the crypto space, even among those with limited traditional financial investments in their portfolios. We show that late entrants in the crypto markets are less wealthy than early adopters. We then show how the fiscal measures adopted during the Covid pandemic have influenced adoption: a significant portion of the stimulus checks has been invested in cryptocurrencies, even by low income individuals. Finally, we show that inflation expectations as well as individual consumption-based CPI are strong predictor of investments in crypto, especially for constrained and sophisticated investors