A Cleveland Fed survey of 25,000 households shows return expectations explain more crypto ownership than demographics. An experiment found past Bitcoin gains boosted purchases by 2.5 percentage points.
Alpha Score of 36 reflects weak overall profile with poor momentum, weak value, weak quality, strong sentiment.
A new working paper from the Federal Reserve Bank of Cleveland argues that the gap between crypto owners and non-owners is not primarily about demographics or risk tolerance. It is about what they expect the asset will return.
The researchers – Michael Weber, Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko – surveyed as many as 25,000 U.S. households per wave. They found that expectations about future crypto returns explain more of the variation in who owns cryptocurrency than age, income or gender. A one-percentage-point increase in an individual's expected crypto return was associated with a 0.8-percentage-point increase in the probability of owning crypto.
Crypto owners expected an average 22% return over the following year, the paper said. Non-owners expected just 7%. Owners also viewed crypto as less risky.
In the 2021 survey, 87% of people who did not own crypto said they did not know what return to expect from it over the following year. Among crypto owners, the figure was 54%.
Demographic patterns still show up. People under 40 were 13 percentage points more likely to own crypto than those over 60, even after controlling for other characteristics. Men were about 4 percentage points more likely than women. Higher-income and wealthier households were also more likely to participate.
The paper includes a randomized information experiment from 2025. Researchers showed some households Bitcoin's (BTC) previous 12-month return. Those who saw the gain raised their desired crypto allocation by roughly 2 percentage points, a 47% increase from the control group's 4.3%. Actual purchases rose by about 2.5 percentage points.
The effect was strongest among people who said they lacked information about crypto. Those who already thought crypto was a bad investment did not change their behavior. The experiment also presented information about stocks and GameStop (GME), only the Bitcoin treatment triggered a shift.
"Positive returns attract new participants, which raises the price further," the authors write. They argue the dynamic is a mechanism behind speculative bubbles.
The paper also examines crypto wealth's impact on spending. A doubling in Bitcoin's price made a household whose entire financial portfolio was in crypto 1.4 percentage points more likely to buy a durable good. The effect did not extend to ordinary spending. The researchers compared crypto gains to "gambling income" or lottery winnings, not a permanent increase in wealth.
For stocks and bonds, demographic and financial characteristics generally have more explanatory power than differences in expected returns. Gold follows the same pattern. Crypto reverses that relationship.
The broader implication, according to the authors, is that crypto's volatility has deep roots in disagreement and learning. "The absence of common information and beliefs about crypto across investors suggests that price volatility will continue to be one of the most defining characteristics of this new asset for the foreseeable future," they write.
Read more: Bitcoin (BTC) profile
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