A working paper from the Federal Reserve Bank of Cleveland attributes cryptocurrency’s distinct market behavior to the beliefs of its investors rather than traditional financial factors. The study, based on repeated surveys of up to 25,000 U.S. households, found that expectations about crypto returns explain a larger share of ownership patterns than demographic characteristics such as age, income or gender.
The paper, titled “Do You Even Crypto, Bro? Cryptocurrencies in Household Finance,” highlights a feedback loop in which rising prices attract new buyers whose purchases further elevate prices. Researchers Michael Weber, Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko note that positive returns can draw in new participants, pushing prices higher and potentially creating speculative dynamics. The effect is amplified by widespread unfamiliarity with crypto: in a 2021 survey, 87% of non-owners reported not knowing what return to expect from crypto over the following year, compared with 54% among owners.
Owners of crypto assets reported significantly higher return expectations than non-owners. On average, crypto owners anticipated a 22% return over the next year, versus 7% among non-owners. A one-percentage-point increase in an individual’s expected crypto return was associated with an 0.8-percentage-point rise in the likelihood of owning crypto. The study found that return expectations and risk perceptions together accounted for far more variation in ownership than observable traits such as age, income or gender.
The research also included a randomized information experiment in 2025, where households were shown Bitcoin’s (BTC) 12-month returns or information about stocks, GameStop or inflation. Participants exposed to BTC’s past performance increased their desired crypto portfolio allocation by roughly 2 percentage points, a 47% rise relative to the 4.3% allocation in the control group. Actual crypto purchases rose by about 2.5 percentage points, with the effect concentrated among those who cited lack of information as a barrier to entry.
Beyond portfolio choices, crypto wealth appeared to influence household spending. A doubling in BTC’s price made a household with an all-crypto portfolio 1.4 percentage points more likely to purchase a durable good, equivalent to a 7% increase over the baseline probability. The effect was temporary and did not extend to general consumption, leading researchers to compare crypto gains to gambling income or lottery winnings rather than a durable increase in wealth.
The authors conclude that crypto’s volatility stems partly from disagreement and learning, as investors form divergent views in the absence of common information. They warn that retail demand may hinge not only on Bitcoin’s price but on how past returns are communicated to potential investors, reinforcing crypto’s status as an asset defined by volatility and speculative dynamics.
