Are cryptocurrencies good investment options during economic downturns? A perspective from individual financial satisfaction

Abstract

The recent economic downturn due to the labour disruption caused by the COVID-19 pandemic has again brought challenges to individual and household financial stability. Motivated by the controversial view regarding the reliability of crypto investments in times of market turbulence, we examined whether investing in cryptocurrencies would be a good option for improving individual financial satisfaction during an economic downturn. Utilizing data from the most recent 2021 cohort of the National Financial Capability Study (NFCS2021) and an instrumental variable design, we find that crypto investments relate to a lower level of financial satisfaction. Moreover, while people with higher income levels are more financially satisfied, working during the pandemic is associated with a lower level of financial satisfaction. In addition to the well-known volatile feature of cryptocurrencies, our findings provide additional insights about their influence on individual financial well-being during economic downturns.