Bitcoin Price Gains Attract New Investors, Fueling Self-Reinforcing Feedback Loop

The Federal Reserve Bank of Cleveland has released a study that sheds light on why Bitcoin's price gains can attract new investors, leading to further price increases. The research involved a survey of over 5,300 participants in 2025, who were randomly exposed to information about various financial assets.

The experiment found that when participants were shown that Bitcoin had gained 14.3% over the previous 12 months, they were more likely to report owning cryptocurrency. In fact, this group was approximately 23% more likely to own crypto than those who didn't see the information, with an ownership rate of around 11%. This effect was similar when participants saw a Bitcoin price chart.

The study also discovered that exposure to Bitcoin's gains increased respondents' desired cryptocurrency allocation by about 2 percentage points. However, this increase came at the expense of cash and bank deposits, highlighting the risk of investors shifting their assets to crypto in pursuit of higher returns.