- A Cleveland Fed working paper finds crypto ownership is driven more by return expectations than demographics
- Crypto owners expected 22% returns vs. 7% for non-owners, with positive returns creating a feedback loop
- Showing households Bitcoin‘s past performance increased desired allocation by 47% and boosted actual purchases
- Crypto wealth behaves like gambling income, with limited spillover into ordinary consumer spending
A new working paper from the Federal Reserve Bank of Cleveland reveals that cryptocurrency ownership is driven primarily by radically different beliefs about future returns rather than demographics or risk profile. Researchers surveyed up to 25,000 US households and found return expectations explain more variation in crypto ownership than age, income, or gender.
Crypto owners expected average 22% returns over the following year, compared to just 7% among non-owners. A one-percentage-point increase in expected return correlated with a 0.8-percentage-point increase in ownership probability.
The paper describes a feedback loop where positive returns attract new participants, pushing prices higher and drawing in more buyers. This dynamic persists despite poor understanding of crypto — a 2021 survey found 87% of non-owners could not specify expected returns.
In a 2025 experiment, households shown Bitcoin’s previous 12-month return increased desired crypto allocation by roughly 2 percentage points, a 47% rise. Actual crypto purchases subsequently increased by about 2.5 percentage points.
“Positive returns attract new participants, which raises the price further,” the authors write. The effect was strongest among people who said they lacked sufficient information about crypto.
Crypto wealth functions more like gambling income than permanent wealth, the paper finds. A doubling in BTC’s price made crypto-heavy households 1.4 percentage points more likely to purchase durable goods, but the effect did not extend to regular spending.
“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,” the authors conclude. For crypto markets, retail demand may depend not only on Bitcoin’s price but on what investors learn about its past performance.
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