Cleveland Fed study finds crypto holders expect 22% annual returns, far above non-holders' 7% estimate, and are unusually responsive to historical price data.
Alpha Score of 51 reflects moderate overall profile with poor momentum, weak value, strong quality, moderate sentiment.
A new study from the Cleveland Federal Reserve says cryptocurrency holders form unusually optimistic beliefs about returns, setting them apart from investors in stocks, bonds or gold.
Crypto ownership among US households rose from about 3% in 2021 to 11–12% later, fluctuating with Bitcoin prices, the study found. Holders tend to be young, male, higher-income and libertarian or politically independent.
“Crypto holders expect much higher rates of return for crypto and perceive it as relatively safer than non-holders do,” the researchers wrote.
They expect returns around 22% annually versus 7% for non-holders. The gap is far wider than for any other asset class the study examined.
The researchers ran an experiment where they gave some survey participants historical return data on crypto. That information led those participants to increase their desired crypto holdings and to buy more crypto in practice.
Bitcoin price movements also affect crypto holders’ spending on durable goods, the study said. About 20% of holders reported that crypto makes up at least half of their net worth. When Bitcoin rose, those households spent more on cars, furniture and other big-ticket items. The effect scaled with the share of crypto in their wealth.
Most holders use crypto as an investment rather than for transactions, echoing earlier Federal Reserve surveys that found investment use far more common than using crypto to buy things.
These patterns make crypto unique in household finance, the researchers said. Heterogeneous expectations – the wide gap between what holders and non-holders believe – and the strong responsiveness to return data create a distinct investor profile not seen in stocks, bonds or gold.
The study was based on the Survey of Household Economics and Decisionmaking, a regular Fed survey, supplemented with a custom module on cryptocurrency beliefs and behavior.
It covers data collected in 2022 and early 2023, after the peak of the 2021 crypto bull run and during the subsequent bear market. Ownership rates dropped with Bitcoin prices but remained well above 2021 levels.
Follow us on X and Facebook.
Prepared with AlphaScala editorial tooling from the source reporting linked above. Indexable analysis may include a cited Alpha Score value. Publishing checks screen each story before release. Educational coverage, not personalized advice.