Bitcoin's Knowledge Gap: A Barrier to Adoption and Price Volatility

A new survey has revealed that despite its popularity, many people still don't understand what Bitcoin is and how it works. According to research from the Federal Reserve Bank of Cleveland, most respondents lack a clear understanding of the asset class and technology behind BTC.

The study found that insufficient information about the asset class is the main reason why people do not own crypto assets, while the second most popular reason is that they consider it a bad investment. However, even among those who do own 'crypto', their reasons don't demonstrate a great understanding of this asset class and technology.

The research also showed that providing information about past Bitcoin price returns can significantly increase both expected returns and investors' desired BTC allocation. In fact, when respondents were shown data on BTC's previous 12-month return, it increased their desired bitcoin allocation by ~47%, while also increasing their expected returns by a few percentage points.

Interestingly, the survey found that people tend to treat Bitcoin gains as lottery winnings rather than conventional wealth. This is reflected in how they spend their crypto returns, as temporary, one-off purchases of big-ticket items rather than a persistent increase in overall spending.