From crypto to stocks: a hidden Markov analysis of trading app gateway effects

초록

This study examines how private investors navigate between cryptocurrency and stock trading mobile applications using a bivariate Hidden Markov model (HMM) to capture transitions between latent states of active and inactive usage across platforms. Analyzing unique app usage data from August 2020 to March 2021-during a significant cryptocurrency bubble-we find a complementary, rather than competitive, relationship between platforms. Our latent state approach finds that cryptocurrency app usage is associated with subsequent stock app engagement. Crypto users tend to be more responsive to word-of-mouth and rising market indices, while stock users react more to volatility. The complementary relationship is particularly pronounced during transition from inactive to active states, suggesting cryptocurrency trading may serve as a gateway to broader market participation.

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