A Federal Reserve Bank of Cleveland working paper indicates that expectations about cryptocurrency returns are the primary driver of ownership, outweighing factors such as demographics or risk tolerance. The study, titled “Do You Even Crypto, Bro? Cryptocurrencies in Household Finance,” analysed data from surveys of up to 25,000 US households conducted in 2021 and a randomized information experiment in 2025. It found that households anticipating higher returns on crypto assets were significantly more likely to invest, with a one-percentage-point rise in expected returns correlating to a 0.8-percentage-point increase in ownership probability.
The research highlights a potential self-reinforcing cycle between rising prices and optimistic expectations, which may exacerbate market volatility. In the 2025 experiment, households exposed to information about Bitcoin’s 12-month performance increased their desired crypto allocation by 2 percentage points—47% higher than a control group—and actual purchases rose by 2.5 percentage points. The study also noted that a doubling in Bitcoin’s price made crypto-owning households 1.4 percentage points more likely to purchase durable goods, suggesting a link between asset prices and consumer spending.
The authors argue that the lack of shared information and beliefs among investors contributes to persistent price swings. “Positive returns attract new participants, which raises the price further,” they write, adding that “price volatility will continue to be one of the most defining characteristics of this new asset for the foreseeable future.” The findings underscore the role of sentiment and information asymmetry in shaping crypto markets, with implications for regulatory and investment strategies.
Written by Oliver Grant
Markets Desk
