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Do Inflation Expectations Drive Cryptocurrency Investments? (Extended Abstract)

Authors Will Cong , Pulak Ghosh , Jiasun Li , Qihong Ruan , Artem Streltsov

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LIPIcs.AFT.2025.10.pdf
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  • Social and professional topics → User characteristics
Keywords
  • Bitcoin
  • Cryptocurrency
  • Household Finance
  • Inflation
  • Stablecoin

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Abstract

This extended abstract summarizes the essence of [Cong, Ghosh, Li, Ruan, and Streltsov, 2024], which uses proprietary data from a predominant cryptocurrency exchange in India and the country’s Household Inflation Expectations Survey to document a significantly positive association between inflation expectations and individual cryptocurrency purchases. The authors find that the effect is concentrated in Bitcoin (BTC) and Tether (USDT) trading, and is robust after controlling for speculative demand captured by surveys of investors' expected cryptocurrency returns. They also find that higher inflation expectations are associated with more new cryptocurrency investors. These results have causal interpretations as confirmed by instrumental variables. The findings of [Cong, Ghosh, Li, Ruan, and Streltsov, 2024] provide direct evidence that households already adopt cryptocurrencies for inflation hedging, which in turn rationalizes their high adoption in developing countries without a globally dominant currency.

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Will Cong, Pulak Ghosh, Jiasun Li, Qihong Ruan, and Artem Streltsov. Do Inflation Expectations Drive Cryptocurrency Investments? (Extended Abstract). In 7th Conference on Advances in Financial Technologies (AFT 2025). Leibniz International Proceedings in Informatics (LIPIcs), Volume 354, pp. 10:1-10:3, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2025) https://doi.org/10.4230/LIPIcs.AFT.2025.10

Author Details

Will Cong
  • Cornell University, Ithaca, NY, USA
Pulak Ghosh
  • Indian Institute of Management, Bangalore, India
Jiasun Li
  • George Mason University, Fairfax, VA, USA
Qihong Ruan
  • Cornell University, Ithaca, NY, USA
Artem Streltsov
  • SUNY Buffalo, Buffalo, NY, USA

Funding

  • Li, Jiasun: NSF 2337338

References

  1. Lin William Cong, Pulak Ghosh, Jiasun Li, Qihong Ruan, and Artem Streltsov. Inflation expectation and cryptocurrency investment. Technical report, National Bureau of Economic Research, 2024. URL: https://www.nber.org/papers/w32945.
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