Fed Study Suggests Bitcoin Returns Spur Crypto Buying

A new study from the Federal Reserve Bank of Cleveland found that providing information about Bitcoin's past returns can increase people's desire to own cryptocurrency. The researchers analyzed data from a survey of thousands of Americans and discovered that those who were shown historical return information on Bitcoin increased their desired crypto allocation by roughly two percentage points, compared to those in the control group.

The study also found that actual crypto purchases subsequently increased by about 2.5 percentage points among households shown Bitcoin performance information. The researchers suggested that this could be a possible mechanism through which rising prices attract new market participants, creating a price feedback loop.

Interestingly, the researchers found that people primarily buy cryptocurrency because they expect the price to continue going up, rather than for any other reason such as using it for transactions or anonymous transfers. This aligns with broader Federal Reserve survey data showing that Americans primarily use cryptocurrency as an investment.