Cryptocurrencies

Cryptocurrencies: when uncertainty fuels risk-taking

October is Financial Literacy Month, which is measured in terms of knowledge of economic phenomena such as inflation and returns, in terms of behaviour – from managing the family budget to the ability to cope with the unexpected – and in terms of attitudes towards investment and risk

by Giovanni S.F. Bruno and Chiara Oldani

6 November 2026

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3' min read

Translated by AI

Versione italiana

3' min read

Translated by AI

Versione italiana

October is Financial Literacy Month, which is measured in terms of knowledge of economic phenomena such as inflation and returns, in behaviour – from managing the family budget to the ability to cope with the unexpected – and in attitudes towards investment and risk. Economic and financial knowledge is also acquired at school, whilst behaviour is influenced by experience and the example set by one’s family. But it is above all when investing one’s savings that understanding the relationship between risk and return becomes essential.

In Italia, there is plenty of room for improvement. Even amongst young adults, basic financial literacy is limited: in the Bank of Italy’s survey of 18–34-year-olds, only 35 per cent answered questions on inflation, interest rates and risk diversification correctly (Bank of Italy, 2024).

Within the vast financial landscape now available to investors, cryptocurrencies deserve particular attention. They are digital assets characterised by high volatility and risks that differ from those of traditional financial instruments. Regulation does not eliminate market risk nor does it guarantee the capital invested. It is therefore essential to understand these risks before deciding whether to invest in this asset class.

The characteristics of the crypto market can make it difficult to interpret what we observe correctly. In our study of the daily prices of Bitcoin (BTC), Ether (ETH) and Ripple (XRP) between 2018 and 2024, we sought to identify episodes of explosive price behaviour using econometric tests. The evidence shows that, for Bitcoin – and to a lesser extent for ETH – there were multiple phases of explosive price growth, followed by corrections that were sometimes sharp; for XRP, however, no significant evidence of such episodes emerged (Oldani, Bruno, & Signorelli, 2025). Cryptocurrencies, therefore, do not all necessarily behave in the same way, and rapid price growth should not automatically be interpreted as a return that is set to last.

How does the cryptocurrency market react when uncertainty surrounding economic policies (interest rate cuts, tax increases, etc.) rises? The results show a positive and statistically significant relationship between uncertainty regarding economic policies and the trading volumes of the most popular cryptocurrencies, particularly when structural changes in the digital market are taken into account (Oldani, Bruno, & Signorelli, 2026).

How should these results be interpreted? Trading volume includes both buys and sells: an increase in it could, therefore, also reflect panic-driven selling. Crypto returns, which should fall in the event of panic selling, are not, however, falling. The evidence is more consistent with speculative behaviour than with panic selling: under certain conditions, greater uncertainty can be accompanied by greater, rather than lesser, exposure to risky assets. A veritable ‘race to risk’.

There is, however, a further caveat. This relationship is not stable over time. The pandemic, the collapse of major digital intermediaries such as FTX, and changes in the regulatory environment define periods characterised by different behaviour. The positive relationship between uncertainty and trading activity emerges more clearly in relatively more homogeneous sub-periods, whilst extending the analysis to different market conditions reveals instability. There is no simple rule governing the behaviour of cryptocurrencies that can be mechanically extrapolated from the past.

Let us consider complementary aspects of the same problem. Prices can go through phases of explosive growth followed by corrections, whilst rising uncertainty can, under certain conditions, intensify rather than curb risk-taking. It is precisely these situations that make it easier to take interpretative shortcuts: mistaking a rise in price for a promise of further gains, an increase in trading volume for greater confidence, or a relationship observed in the past for a permanent characteristic of the investment.

Financial education also helps to avoid these mistakes. It is not enough simply to know the meaning of return, inflation or diversification: one must distinguish between return and risk, trading activity and market direction, and historical trends and guarantees for the future. These distinctions are particularly important when investing in volatile assets such as cryptocurrencies.

Bibliography

Bank of Italy. (2024). Surveys on financial literacy and digital finance skills in Italia: young people – 2023. Bank of Italy.

Oldani, C., Bruno, G. S. F., & Signorelli, M. (2025). Collapsing bubbles in the prices of cryptocurrencies. The Journal of Economic Asymmetries, 31.

Oldani, C., Bruno, G. S. F., & Signorelli, M. (2026). Uncertainty shocks and trading intensity of cryptocurrencies. Digital Finance, 8(3), 1–25.

*Bocconi University

*University of Tuscia

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Cryptocurrencies: when uncertainty fuels risk-taking

October is Financial Literacy Month, which is measured in terms of knowledge of economic phenomena such as inflation and returns, in terms of behaviour – from managing the family budget to the ability to cope with the unexpected – and in terms of attitudes towards investment and risk

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I prossimi eventi

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