Bitcoin Price Gains Lure New Buyers into Cryptocurrency

Researchers from the Federal Reserve Bank of Cleveland found that Bitcoin's price gains can draw new buyers into cryptocurrency by lifting expectations for future returns.

The study, titled 'Do You Even Crypto, Bro? Cryptocurrencies in Household Finance,' used a working paper to analyze how different pieces of financial information affected participants' expectations and subsequent ownership. The researchers divided participants into groups and provided them with various types of information about Bitcoin's past performance, including its 14.3% return over the previous 12 months.

The results showed that participants who received Bitcoin's exact return information raised their expected crypto return for the following year by 3.2 percentage points relative to a control group. Those shown the Bitcoin price chart increased their expected return by about 1.2 percentage points.

The shift in expectations directly influenced desired portfolios, with participants increasing their desired allocation to crypto by about 2 percentage points from an average of 4.3%. The increase came mainly from money respondents would otherwise have kept in checking, savings, or cash accounts.