Consumer Behaviour in Cryptocurrency Trading: Theory, Risk and Mitigation

This report discusses the theory of reasoned action for explaining the multi-faceted nature of consumer buying behaviour of cryptocurrency users. It also highlights the risks involved in cryptocurrency trading, such as volatility, unregulated market, and susceptibility to market manipulation, and suggests ways to mitigate these risks. The report emphasizes the importance of extensive research, having enough capital, keeping a keen watch, evaluating the market, and not investing just because others are doing it. The subject is consumer behaviour, and the course code, name, and college/university are not mentioned.

Consumer Behaviour

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
One specific theory for explaining multi-faceted nature of consumer buying behavior of
cryptocurrencies users............................................................................................................3
Risk involved in cryptocurrencies use....................................................................................3
Ways to mitigate the risk in consumer buying process..........................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
The report highlights about the consumer behaviour while trading in Cryptocurrency in
which one specific theory for explaining multi-faced nature of consumer buying behavior of
Cryptocurrency users is explained including the risk involved and ways to mitigate the risk is
determined. It is a type of digital token which is designed to work as a medium of exchange by
using decentralized technology that make secure payment and store money without going
through bank (Valdeolmillos and et. al., 2019).
PART A
One specific theory for explaining multi-faceted nature of consumer buying behavior of
cryptocurrencies users
The theory which is implemented for explaining multi-faceted nature of consumer buying
behavior of cryptocurrencies users is theory of reasoned action. The theory was developed by
Martin Fishbein and Icek Ajzen by focusing on analysing pre-existing attitudes in decision
making process. The theory explains that consumer act on behavior based on their intention to
receive or create results. It determines that customers are rational actors who focus on choosing
to act in their best interest. As per the theory, specificity is critical in decision making process.
Consumers generally take specific action when they expect any positive results. Cryptocurrency
has attracted substantial investment from consumers, businesses and the media. One of the
attractive features of Cryptocurrency is security and control over their money which influence
the consumer buying behaviour of Cryptocurrency users (Sharma and et. al., 2020). The
transaction of Cryptocurrency is protected with by military grade encryption due to which no one
can charge or make payment on behalf of customers without their permission. The
Cryptocurrency users might face heavy risk while trading but still they are ready to invest and
use widely.
Risk involved in cryptocurrencies use
The risk which is involved while trading Cryptocurrency is related to its volatility. It is
important for consumers to understand the risk while trading as it is of high risk and speculative.
The Cryptocurrency trading is volatile as if there are unexpected changes in market sentiment
can leads to sudden and sharp moves in price (Nagpal, 2017). The value of cryptocurrencies also
gets dropped by hundreds and thousands of dollars quickly if any unexpected changes occur. The

cryptocurrencies are unregulated by the central banks and government. It is developed to free
from government oversight as it is monitored through peer-to-peer internet protocol. The other
risk which might face by Cryptocurrency users is that it can be influenced by forks and
discontinuation (Trump and et. al., 2018). If hard fork occurs, there would be price volatility
around the event and also the trading could be suspended if they don’t have reliable prices from
underlying market. Cryptocurrency has also attracted the large set of criminal community due to
which they can break into crypto exchanges, infect individual computers with malwares and
drain crypto wallets that steals Cryptocurrency. The transaction of cryptocurrencies is conducted
on internet due to which the hackers target people, storage areas and service handling by
spoofing and malware. The market risk of Cryptocurrency is idiosyncratic as the currency trades
only on demand. While trading in Cryptocurrency there is a finite amount of currency in which
users can suffer from liquidity concern and the ownership is also limited which make it
susceptible to market manipulation.
Ways to mitigate the risk in consumer buying process
While trading in Cryptocurrency it is important to understand the risk associated and also
identify the ways through which customers can mitigate the risk in consumer buying process.
There are various ways to reduce the risk such as:
Extensive research:
It is one of the way through which customers can reduce the risk of Cryptocurrency.
Consumers must focus on researching, reading and then acting, before making investment in
Cryptocurrency. It is important for customers to read its whitepaper so that they can give fair
idea about what the plans for Cryptocurrency are and how they align with consumers goals.
Customers must give time to read and understand a digital currency before investing in it, if
consumers face laziness it can cost their money (Schellinger, 2020).
Consumers must have enough money:
In starting consumer must focus on using only buffer money as many people make
investment through their hard-earned money which is their biggest mistake as they think it will
turn to profit soon. It is necessary to ensure that consumers must have enough capital and their
investment must not require elsewhere in immediate future (Kethineni and Cao, 2020).
Customers must not take any loan and invest in Cryptocurrency.
Keep a keen watch:

Customers must focus on keen as the exchanges in cryptocurrencies are not completely
secure as there are no clear cut rules and regulations. There are possibilities for consumers to
being got scammed on internet. If customers losses their money, then they cannot get it back, it is
essential to focus on each step with extreme caution so that they can prevent themselves from
scammed.
Keep evaluating the market:
Investing in Cryptocurrency is not an effective method to make money, customers might
face risk of online scams due to which there are possibilities for facing heavy loss and losing
money. Consumers must focus on evaluating the market all the time and also understand the
direction where market is going. If customers depends on unit price of token than it leads to
disappointment. It is important to predict the mood of market and start making money.
Don’t invest if others are doing:
Consumers generally get attracted with the idea of particular token is doing well at the
moment but sometime it brings uncertainty which influence the money of customers (Hileman
and Rauchs, 2017). They think that they might loose an opportunity to make good profit but it is
necessary for beginners to not come in under pressure just because their fellow members are
investing.
CONCLUSION
It is being concluded form the above information that Cryptocurrency have various benefits
and risk associated with trading. It is not issued by central authority due to which there is no
interference or manipulation of government. Cryptocurrency is a digital currency that exists
electronically and design to work as a medium of exchange. There are various risks which are
associated such as market risk, business risk, fraud risk and operational risk.

REFERENCES
Books and Journals
Hileman, G. and Rauchs, M., 2017. 2017 global cryptocurrency benchmarking study. Available
at SSRN 2965436.
Kethineni, S. and Cao, Y., 2020. The rise in popularity of cryptocurrency and associated criminal
activity. International Criminal Justice Review. 30(3). pp.325-344.
Nagpal, D., 2017. Cryptocurrency: The revolutionary future money. Available at SSRN 3090813.
Schellinger, B., 2020. Optimization of special cryptocurrency portfolios. The Journal of Risk
Finance.
Sharma, D. K., Pant, S., Sharma, M. and Brahmachari, S., 2020. Cryptocurrency mechanisms for
blockchains: models, characteristics, challenges, and applications. In Handbook of
research on blockchain technology (pp. 323-348). Academic Press.
Trump, B. D and et. al., 2018. Cryptocurrency: governance for what was meant to be
ungovernable. Environment Systems and Decisions. 38(3). pp.426-430.
Valdeolmillos, D and et. al., 2019, June. Blockchain technology: a review of the current
challenges of cryptocurrency. In International Congress on Blockchain and
Applications (pp. 153-160). Springer, Cham.