DIGITAL CURRENCY ADOPTION AND GLOBAL FINANCIAL MARKET PERFORMANCE: THE ROLE OF FINANCIAL INNOVATION, RISK PERCEPTION, AND INVESTOR CONFIDENCE

Abstract

The rapid development of digital financial technologies has accelerated the adoption of digital currencies across global economies, significantly influencing financial market structures and investment behaviour. This study examines the impact of digital currency adoption on financial market performance by analysing the mediating roles of financial innovation and investor confidence, along with the moderating effect of risk perception. A quantitative research design was employed, and primary data were collected from 100 respondents, including investors and users of digital financial services. Structural Equation Modeling (SEM) using AMOS was applied to test the proposed relationships. The results indicate that digital currency adoption significantly influences financial innovation (β = 0.62, p < 0.001) and investor confidence (β = 0.54, p < 0.001), which in turn positively affect financial market performance. Risk perception was found to moderate the relationships between adoption and market outcomes. The study contributes to the literature by integrating financial innovation and behavioural finance perspectives within a unified SEM framework. The findings provide practical implications for policymakers, financial institutions, and investors in promoting sustainable digital financial ecosystems.