Impact of Behavioural Biases on Cryptocurrency Investment Decisions with the Moderating Effect of Financial Literacy

Cryptocurrency investments have gained global popularity in the recent past. In the volatile markets, behavioural biases can lead to suboptimal investment decisions. Lack of financial literacy further intensifies behavioural biases, leading to emotional and irrational investment decisions. This study investigates the impact of herding, heuristics, and prospect factors on cryptocurrency investment decisions in Sri Lanka, with a focus on the moderating role of financial literacy. A quantitative research design was employed, collecting data from 158 cryptocurrency investors through self-completion questionnaires distributed via social media platforms. Descriptive and inferential statistics were used to analyse the data, and Partial Least Squares-based Structural Equation Modeling (PLS-SEM) was applied to measure the influence of the identified biases on investment decisions. The results indicate that heuristic and prospect factors have a greater influence on investment decisions compared to the herding effect. Additionally, financial literacy does not moderate the impact of these biases on investment decisions. These findings contribute to literature while providing insights for investor education and guiding policymakers in regulating informed investment decisions to reduce impulsive, bias-driven choices.