Understanding speculative investment behavior in the Bitcoin context from a dual-systems perspective
| Pages | 1431-1456 |
| Date | 12 August 2019 |
| Published date | 12 August 2019 |
| DOI | https://doi.org/10.1108/IMDS-10-2018-0441 |
| Author | Hyun-Sun Ryu,Kwang Sun Ko |
| Subject Matter | Information & knowledge management |
Understanding speculative
investment behavior in the
Bitcoin context from a
dual-systems perspective
Hyun-Sun Ryu
College of Software,
Sungkyunkwan University, Suwon, The Republic of Korea, and
Kwang Sun Ko
Department of Financial IT, Kim & Chang,
Seoul, The Republic of Korea
Abstract
Purpose –The purpose of this paper is to examine users’decision-making mechanism of speculative
investment behavior and its sequential consequences in the Bitcoin context from a dual-systems perspective.
Design/methodology/approach –Original data were collected via a survey of 334 participants with
experience in Bitcoin speculative investment. The partial least squares method was used to test the proposed model.
Findings –Speculative investment behavior in the Bitcoin context is driven by strong impulse and weak
self-control, leading to negative consequences. The extent of the imbalance between the two cognitive
systems is greater with the subjective norm than without it, thus facilitating speculative investment behavior.
Noteworthy differences in the impulse and self-control effects on Bitcoin speculative investment are found
with differences in Bitcoin objective and subjective knowledge.
Originality/value –This study is the first attempt to empirically investigate users’decision-making
mechanism used when speculating in Bitcoin.
Keywords Bitcoin, Speculative investment behaviour, Dual-systems perspective, Subjective norm,
Bitcoin knowledge
Paper type Research paper
1. Introduction
Bitcoin, the most prominent cryptocurrency, has attracted substantial public attention and
been prominently addressed by media, venture capitalists and financial and governmental
institutions. Proposed by Nakamoto (2008), Bitcoin is a peer-to-peer electronic payment
system that can be sent directly from one party to another without central authority or
intermediaries. Although Bitcoin was originally defined as an alternative currency, it has
also been viewed as a speculative asset because of its considerable user demand. With its
price volatility and expected large return, Bitcoin increased in popularity and became
known to the public (Blau, 2017).
Orcutt (2015) pointed out that Bitcoin has not seen broad use in retail transactions
despite its increasing popularity and public attention. Hur et al. (2015) explained Bitcoin’s
incompetence as an alternative currency against the conventional tools of trade. Previous
studies (Baur et al., 2018; Blau, 2017; Cheah and Fry, 2015; Hur et al., 2015) have provided
empirical evidence that Bitcoin is mainly used as a speculative asset and not as an
alternative currency. That is, customer participation in Bitcoin is indeed speculative, and
Bitcoin users perceive Bitcoin only as a speculative investment tool (Baur et al., 2018; Hur
et al., 2015). Nevertheless, the use of Bitcoin as an investment vehicle has been overlooked Industrial Management & Data
Systems
Vol. 119 No. 7, 2019
pp. 1431-1456
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-10-2018-0441
Received 10 October 2018
Revised 30 April 2019
Accepted 6 July 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
This work was supported by the Ministry of Education of the Republic of Korea and the National
Research Foundation of Korea (NRF-2019S1A5A8034813).
1431
Bitcoin
speculative
investment
behavior
because many researchers continue to focus on the value of Bitcoin as an alternative
currency and medium of exchange.
In late 2017, many people were tempted to speculate in Bitcoin in ways that challenged
their self-control or willpower because of the expected large return derived from Bitcoin
price dynamics. With their expectation of a large return, some Bitcoin users lost their
self-control and became impulsive, ultimately engaging in speculative investment. At that
point, Bitcoin users’speculative investment behavior might not have been intended or
planned but rather impulsive. Because the previous IS approaches to examine planned
behaviors (e.g. theory of planned behavior (TPB) (Ajzen, 1991) and theory of reasoned action
(Ajzen and Fishbein, 1977)) are inadequate to explain speculative investment behavior in the
Bitcoin context, a new approach is needed.
In addition, Bitcoin is not regulated for risk mitigation or governance requirements,
leading to substantial risks in the market (Bohr and Bashir, 2014; Moore and Christin, 2013).
The speculative nature of Bitcoin as an asset results in asset bubbles and price
destabilization (Shiller, 1981; Stein, 1987), causing harmful effects on individuals and
society. Policy makers and regulators are seriously concerned about the potential risks of
Bitcoin and have thus tried to prohibit speculative trading in Bitcoin to block its negative
effects on individuals and society. For example, during the Bitcoin peak in 2017, the People’s
Bank of China ordered its financial institutions to stop providing banking or funding to any
activity related to any cryptocurrency (Yu, 2018). Although the prior literature has
investigated the technological, economic and regulatory aspects of Bitcoin (Abramova and
Böhme, 2016; Böhme et al., 2015; Glaser et al., 2014), only a few studies have examined
Bitcoin usage behavior and its sequential consequences from a user perspective.
To bridge that research gap, we have investigated the cognitive processes of Bitcoin
users as they made decisions that led to speculative investment behavior, along with the
sequential consequences of their choices. We employed a dual-systems perspective to better
understand speculative investment behavior in the Bitcoin context. This study investigates
three main issues:
RQ1. What decision-making mechanism leads Bitcoin users into speculative investment
behavior?
RQ2. Does the decision-making mechanism of Bitcoin users differ depending on the
subjective norm and Bitcoin knowledge?
RQ3. Is speculative investment behavior associated with negative consequences in the
Bitcoin context?
To answer those research questions, we collected empirical data from 334 Bitcoin users with
experience Bitcoin speculation in the year 2017 in South Korea. South Korea was an
appropriate place to observe the Bitcoin speculative phenomenon and collect our data
because it was third worldwide in terms of Bitcoin trading volume in 2017. The collected
data were used to investigate the effects of impulse and self-control on speculative
investment behavior in the Bitcoin context from a dual-system perspective. We then
determined how impulse and self-control factors differ depending on the subjective norm
and Bitcoin knowledge. Finally, the relationship between speculative investment behavior
and negative consequences was examined.
2. Theoretical background
2.1 Bitcoin
Bitcoin has emerged as a fascinating phenomenon in the finance markets. As the first
decentralized cryptocurrency, Bitcoin was designed as an electronic peer-to-peer payment
system depending neither on central authorities nor on intermediaries to offer diverse
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