Crypto Ownership Hinges on Expected Returns, Not Demographics

A recent study by the Federal Reserve Bank of Cleveland found that expectations of future returns and risk perception play a significant role in determining whether individuals hold cryptocurrency. The study analyzed surveys of up to 25,000 households and discovered that demographics such as age, income, and gender have less influence on crypto holding compared to stocks, bonds, and gold.

The researchers found that holders' average expected return for crypto was 22%, significantly higher than non-holders' 7%. A 1% increase in expected returns led to an 0.8% rise in the likelihood of holding crypto. The study also revealed that younger individuals, men, and those with higher incomes were more likely to hold crypto.

When participants were provided with information about Bitcoin's past return, their desired allocation to crypto increased by 47%. However, this effect was limited to those who had not already judged crypto as a negative investment target. The study also found that households holding their entire portfolio in crypto were more likely to buy durables if the Bitcoin price doubled.