A study of the influence of psychological factors and financial literacy on investment decisions in cryptocurrencies from the perspective of new investors

Abstract

Understanding how psychology and financial literacy shape new investors crypto decisions newlineis vital in today s fast moving markets. Crypto s volatility, decentralization, and uneven newlineregulation create outsized upside and equally outsized risk through sharp swings and newlinepotential manipulation. newlinePsychological drivers often steer choices. Risk tolerance matters: high tolerance newcomers newlinemay chase returns despite drawdowns, while low tolerance investors prefer steadier assets. newlineCognitive biases also intrude. Herding can fuel bubbles or panics as people follow the newlinecrowd. Confirmation bias narrows research to belief friendly sources, encouraging newlineoverconfidence and suboptimal timing. newlineFinancial literacy counterbalances these pressures. Investors who grasp diversification, risk newlinemanagement, valuation basics, and security practices (e.g., custody and scams) typically newlinejudge projects more soberly, compare tokens on fundamentals, and align positions with newlinegoals and time horizons. newlineThis study examines, from the perspective of new investors: newline1. Psychological factors risk tolerance, biases, overconfidence, fear/greed cycles and newlinetheir impact on crypto choices; newline2. Financial literacy and prior investing experience as moderators of behavior and newlineoutcomes; newline3. Links between psychological traits and observable behaviors such as holding, trading newlinefrequency, and FOMO buying; newline4. Demographic and psychological variables (age, education, income, technology newlinefamiliarity) that influence participation and risk taking. newlineGoal: clarify how mindset plus money knowledge jointly drive crypto decisions and how newlinebetter literacy can help mitigate bias and volatility.