Crypto Investors Driven by Beliefs on Future Returns

A new study by the Federal Reserve Bank of Cleveland reveals that cryptocurrency investors are driven by their beliefs about future returns, rather than demographics or risk appetites.

The researchers used repeated surveys of up to 25,000 US households per wave and found that expectations about crypto returns explain more variation in who owns cryptocurrency than demographic characteristics.

The study also conducted a randomized information experiment, showing that simply giving people information about Bitcoin's recent performance can increase both their desired crypto allocation and subsequent purchases.

The researchers conclude that this could be a mechanism behind speculative bubbles, where past gains attract new investors whose purchases push prices higher.