A recent study conducted by a team of academic researchers from the United States delved into the impact of the “gambler’s fallacy” on cryptocurrency donations. The researchers found that organizations accepting crypto donations could potentially benefit from timing the market in order to optimize their fundraising strategies.
The study explored the concept that individuals often misinterpret certain pattern signals in finance. Charities that understand the tendency for crypto holders to hold or move assets based on perceived market conditions may be able to design more effective fundraising campaigns to attract larger donations.
The team tested their premise by conducting an empirical study of cryptocurrency donations to 117 campaigns on an online crowdfunding platform. Additionally, they conducted a controlled online experiment to study the features of the cryptocurrency donation context.
The analysis revealed a direct correlation between market movement and donation “activation” (first-time donations) as well as donation sizes. The team also found that recent changes in asset price appeared to affect donors’ decisions, in line with the gambler’s fallacy heuristic.
The gambler’s fallacy, also known as the Monte Carlo fallacy, refers to the tendency for people to misinterpret statistically meaningless historical events as predictors for future odds. In the context of the study, this manifested as donors being more likely to be activated to donate after experiencing declines in asset value, as they felt more confident that prices would rise post-donation due to the gambler’s fallacy.
The researchers also observed that participants’ reliance on the gambler’s fallacy was amplified when they faced urgent donation appeals. The study ultimately concluded that these insights could serve as empirical evidence for organizations and individuals managing charities that accept cryptocurrency donations and could be used to inform decision-making processes.