Study Explores Gambler's Fallacy Impact on Cryptocurrency Donations

According to Cointelegraph, a team of academic researchers from the U.S. recently published a study exploring how the “gambler’s fallacy” affected cryptocurrency donations. Their findings indicate that organizations accepting crypto donations could benefit from timing the market. The team’s work explores the idea that people generally misinterpret certain pattern signals when it comes to finance. Charities that understand the penchant for crypto holders to hold or move assets based on perceived market conditions may be able to optimize their strategies to reap larger donations. The team tested their premise through an empirical study of cryptocurrency donations to 117 campaigns at an online crowdfunding platform. They also conducted a controlled online experiment studying features of cryptocurrency donation context. After careful analysis, the team determined that market movement was directly correlated to donation "activation" (first time donations) and donation sizes. According to the paper, the online experiment expanded on the empirical analysis and demonstrated that “donors’ decisions are affected by recent changes in asset price, consistent with the gambler’s fallacy heuristic.” During the study, the researchers determined that participants are more likely to be activated to donate after experiencing declines in asset value. This purportedly occurs because donors feel more confident that prices will go up after their donation due to the gambler’s fallacy. “Moreover,” the paper continues, “we observe that participants’ reliance on the gambler’s fallacy is amplified when they face urgent donation appeals.” Ultimately, the paper concludes that these insights could be as empirical evidence in the decision-making process for organizations and individuals managing charities that accept cryptocurrency donations.