Cryptocurrency ownership and cognitive biases in perceived financial literacy

Acknowledging the potential threats posed to financial stability by owning cryptoassets combined with a lack of financial literacy, this paper investigates the relationship between financial literacy and cryptocurrency ownership using machine learning methods. Analyzing 2121 survey responses, it shows that financial literacy emerges as a crucial factor in cryptocurrency ownership, even when accounting for other factors such as age, income, and digital activity. A neural network model reveals that a unit increase in financial literacy reduces the probability of cryptocurrency ownership by 0.2. Causal forest analysis indicates that financial literacy bias positively impacts ownership likelihood (a point estimate of 75.30 %). However, the bias-corrected financial literacy measure has a negative effect of −25.40 % on ownership likelihood. This reveals that cognitive biases, particularly overconfidence, as a significant influence on cryptocurrency ownership. These results show that individuals with more financial literacy and with less biased self-assessments are less likely to hold cryptocurrencies. • Examines the relationship between financial literacy and cryptocurrency ownership using machine learning methods. • Financial literacy bias positively impacts ownership likelihood. • Bias-corrected financial literacy measure has a negative effect on ownership likelihood. • Individuals with more financial literacy and those less biased self-assessments are less likely to hold cryptocurrencies. • Cognitive biases, particularly overconfidence, have a significant influence on cryptocurrency ownership.