The Impact of Financial Literacy on Gen-Z Crypto Investment Decision Through Herding Behavior as Mediator in the Twin Cities of Pakistan

Abstract

Cryptocurrency investment has become a compelling phenomenon among Generation Z (Gen Z), a demographic recognized for its digital savviness and active engagement with innovative financial tools. However, their investment decisions are often shaped not only by their financial knowledge but also by behavioral tendencies like herding behavior, where individuals mimic the actions of others without conducting independent analysis. This study investigates the mediating role of herding behavior in the relationship between financial literacy and cryptocurrency investment decisions, focusing on Gen Z in Islamabad and Rawalpindi, Pakistan. A quantitative research approach was employed, using structured surveys to collect data from Gen Z investors, followed by statistical analysis to explore the interactions between the studied variables. The findings reveal that financial literacy has a significant positive impact on cryptocurrency investment decisions and plays a critical role in reducing the reliance on herding behavior. Moreover, herding behavior was found to mediate the relationship between financial literacy and investment decisions, indicating that even financially literate individuals are susceptible to social influences in investment contexts. These insights underscore the importance of tailored financial literacy programs and behavioral interventions to enhance investment outcomes for young investors. This research contributes to the behavioral finance literature, particularly in emerging markets like Pakistan, and provides practical recommendations for policymakers, educators, and financial institutions to foster informed and independent investment decision-making.