A new Federal Reserve Bank of Cleveland working paper offers a provocative explanation for why cryptocurrency behaves so differently from traditional financial assets: Americans who buy crypto don’t simply have different demographics or risk appetites, they have radically different beliefs about digital assets’ future returns.

The finding could help explain both crypto’s persistent volatility and the way rallies can attract new buyers, potentially creating a feedback loop in which rising prices reinforce bullish expectations and pull more investors into the market.

Using repeated surveys of as many as 25,000 US households per wave, researchers Michael Weber, Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko found that expectations about crypto returns explain more of the variation in who owns cryptocurrency than a broad range of demographic characteristics. 

The paper, titled “Do You Even Crypto, Bro? Cryptocurrencies in Household Finance,” also uses a randomized information experiment to show that simply giving people information about Bitcoin’s (BTC) recent performance can increase both their desired crypto allocation and their subsequent purchases. 

Perceived risk of crypto by ownership. Source: Federal Reserve Bank of Cleveland

The researchers say the results point to a potential mechanism behind speculative bubbles: past gains can attract new investors, whose purchases push prices higher and potentially attract still more buyers. 

“Positive returns attract new participants, which raises the price further,” the authors write

That dynamic is particularly striking because cryptocurrency remains poorly understood by a large share of the population. In the researchers’ 2021 survey, 87% of people who did not own crypto said they didn’t know what return to expect from it over the following year. Among crypto owners, the figure was still 54%. 

Related: Canadian crypto ownership increases to 25%: Ontario survey

Ownership linked to double-digit returns expectations

For those willing to make a forecast, however, the gap was enormous. Crypto owners expected an average 22% return over the following year, compared with just 7% among non-owners. Owners also tended to view crypto as less risky than non-owners did. 

The researchers found that expected returns were unusually powerful in determining ownership. A one-percentage-point increase in an individual’s expected crypto return was associated with a 0.8-percentage-point increase in the probability of owning cryptocurrency. Expectations about returns and risk together explained considerably more variation in crypto ownership than observable characteristics such as age, income and gender. 

That makes crypto an outlier compared with stocks, bonds and gold. For traditional assets, demographic and financial characteristics generally have much more explanatory power than differences in expected returns. Crypto reverses that relationship. 

Source: Federal Reserve Bank of Cleveland

The demographic profile of crypto investors nevertheless remains distinctive. People under 40 were 13 percentage points more likely to own cryptocurrency than those over 60, even after controlling for other characteristics. Men were about 4 percentage points more likely than women to own crypto, while higher-income and wealthier households were also more likely to participate. 

The experiment provides perhaps the paper’s most consequential finding for crypto markets.

In 2025, researchers randomly assigned households to receive information about BTC, stocks, GameStop or inflation. Participants who were shown Bitcoin’s previous 12-month return increased their desired crypto portfolio allocation by roughly 2 percentage points, or about a 47% increase relative to the 4.3% desired allocation among the control group. Actual subsequent crypto purchases also rose by about 2.5 percentage points. 

The authors describe the result as “providing information about recent Bitcoin returns induces some households to start buying cryptocurrency.” 

The effect was concentrated among people who said they didn’t own crypto because they lacked sufficient information. Those who already believed crypto was a bad investment generally did not respond to the information treatment. 

The paper also finds that crypto wealth can spill into household consumption. A doubling in BTC’s price made a household whose entire financial portfolio was in crypto 1.4 percentage points more likely to buy a durable good, equivalent to roughly a 7% increase relative to the unconditional probability of such a purchase. But the effect did not persist into ordinary spending. 

That led the researchers to a stark comparison: crypto gains appear to be treated more like “gambling income” or lottery winnings than a permanent increase in wealth.

The broader implication is that crypto’s volatility may be rooted partly in disagreement and learning rather than simply market fundamentals. The authors conclude that cryptocurrency stands out because it is poorly understood, investors form sharply different views about its prospects, and new information about past returns can change both expectations and behavior.

“The absence of common information and beliefs about crypto across investors,” they write, “suggests that price volatility will continue to be one of the most defining characteristics of this new asset for the foreseeable future.” 

For crypto markets, that suggests a potentially uncomfortable conclusion: the next wave of retail demand may depend not only on Bitcoin’s price, but on what investors are told about the price that came before it.

Magazine: The 100x obsession: Fundamentals grow in importance as crypto matures

BitMart said on Aug. 21 that it was exploring a restructuring plan involving creditor distributions and the phased restart of selected operations, less than four weeks after announcing a complete wind-down.

The exchange appointed White & Case as restructuring counsel. It promised another update by Sept. 9 but did not cancel its existing Aug. 26 trading cutoff or Jan. 31, 2027, closure date.

The announcement marks BitMart’s first public reference to creditors. It does not explain which customers or counterparties fall within that category.

BitMart restart remains under assessment

BitMart said the proposed plan could combine an orderly resumption of certain services with distributions to creditors. Any restart remains subject to legal, financial, operational and regulatory reviews.

“The potential plan may include the phased resumption of certain operations,” BitMart said. The company has not approved or launched that plan.

White & Case will evaluate available options with BitMart’s other advisers. The law firm’s appointment does not establish that BitMart has entered bankruptcy or another court-supervised process.

No verified bankruptcy petition, restructuring case number or creditor-claim portal had been published when this report was prepared. BitMart also has not identified the legal entity or jurisdiction that would administer distributions.

The exchange said it expects to consult its community after a business resumption plan launches. It has not explained how customers would participate or whether any creditor vote would be required.

August 26 trading deadline remains active

BitMart’s closure notice still schedules all spot, futures and other trading to end at 01:00 UTC on Aug. 26.

Futures accounts have entered reduce-only mode, while spot markets stopped accepting new orders. New registrations and cryptocurrency and fiat deposits began closing on July 26.

Any futures positions remaining at the deadline may be settled using the applicable mark price, index price or platform settlement rules. BitMart said it would publish separate settlement arrangements, but the restructuring update did not provide them.

The exchange previously recommended completing verification and submitting withdrawal requests before 05:00 UTC on Aug. 26. Withdrawals officially remain available, although additional identity, sanctions, transaction-history and wallet checks may delay processing.

As crypto.news reported, the shutdown announcement sent BMX down more than 60% within the surrounding 24-hour period. The possible restructuring does not currently change the withdrawal guidance.

Creditor language raises unanswered questions

BitMart did not disclose why customer or counterparty balances may require creditor distributions rather than ordinary withdrawals. Its July notice cited operating conditions, the market environment and future strategy without describing a shortfall.

The latest statement includes no balance sheet, liability total, reserve report or recovery percentage. It also does not establish whether user assets and unsecured commercial claims would receive different treatment.

Earlier concerns about BitMart’s reserves and custody position were based partly on third-party wallet tracking and customer reports. Those observations do not independently establish the exchange’s complete assets or liabilities.

Onchain balances cover only publicly identified wallets. They cannot show undisclosed addresses, fiat holdings, offchain liabilities or assets held through custodians. A reliable recovery assessment therefore requires audited financial information or verified court disclosures.

September roadmap must clarify payouts

BitMart said it would “endeavour” to provide another update no later than Sept. 9. The wording commits the exchange to further communication rather than a finalized restructuring agreement.

The next announcement needs to identify which operations could restart, which legal entities owe creditors and how claims will be valued. Customers also need information about payout timing, available assets and the treatment of pending withdrawals.

Unless BitMart formally changes its schedule, trading will stop two weeks before the restructuring update. The wider platform remains scheduled to terminate at 15:59 UTC on Jan. 31, 2027.

BMX was trading near $0.061 on Aug. 23, according to CoinGecko. The token remained approximately 80% below its price one month earlier despite recovering modestly over the preceding week.

The Sept. 9 update will determine whether BitMart has a viable restart proposal or continues with its original wind-down. Until then, the phased restart and creditor distributions remain possible components rather than confirmed outcomes.

Michael Saylor renewed his case for Bitcoin on Aug. 23, describing the asset as a mechanism for converting economic value into a digital form that individuals, companies and governments can control.

“Bitcoin represents the breakthrough of converting economic energy into digital form and securely binding it to a person, family, company, machine, or state,” Saylor wrote on X.

“Digital energy” is Saylor’s metaphor for transferable and durable value. It is not an accounting, legal or technical classification. His statement also expresses an investment thesis rather than establishing Bitcoin’s definitive purpose.

Bitcoin as digital energy remains Saylor’s thesis

Saylor has repeatedly compared money and capital with stored energy. Under that framework, Bitcoin’s capped supply and decentralized settlement system allow owners to move value without relying on a single bank or government.

That argument does not remove Bitcoin’s price risk. Its dollar value can change rapidly, while companies holding it must still meet salaries, debt payments and shareholder distributions in conventional currencies.

Strategy has put Saylor’s thesis into practice through the largest publicly disclosed corporate Bitcoin treasury. Its latest SEC filing reported 840,447 BTC as of Aug. 16.

Strategy’s 840,447 BTC moves above acquisition cost

Strategy acquired its remaining Bitcoin for $63.36 billion, including fees. That equals an average cost of $75,385 per coin. The position represents approximately 4% of Bitcoin’s 21 million maximum supply, although that comparison includes coins that have not yet been mined.

Bitcoin traded near $77,175 on Aug. 23. At that price, Strategy’s holdings were worth approximately $64.86 billion. That placed the position about $1.50 billion above its aggregate acquisition cost.

The figure is a market-based estimate, not a fixed company profit. It can change immediately with Bitcoin’s price and does not account for Strategy’s debt, preferred dividends, operating expenses or taxes. As crypto.news reported, the treasury only recently crossed its $75,385 average cost during Bitcoin’s recovery.

Strategy’s digital credit products are preferred shares

Strategy calls its capital-markets platform “Digital Credit.” The category includes exchange-listed preferred shares such as STRC, STRF, STRK and STRD. These instruments are not tokens issued on a blockchain.

STRC is a variable-rate perpetual preferred stock listed on Nasdaq. It has a $100 stated amount and pays cash dividends when declared by Strategy’s board. Its prospectus warns that management may fail to keep its market price near $100.

Strategy has nevertheless used repurchases and dividend adjustments to support STRC. Its Aug. 17 filing showed that the company spent $132.2 million repurchasing 1.39 million STRC shares during the previous week.

The company financed those purchases with MSTR common-share sales, not tokenized Bitcoin obligations. In the preceding week, however, Strategy sold 1,690 BTC for $108.6 million and used those proceeds for STRC repurchases, as previously reported.

What Strategy investors should watch next

Strategy raised $333.7 million by selling approximately 3.46 million MSTR shares between Aug. 10 and Aug. 16. It allocated $52.4 million to STRC dividends, $132.2 million to repurchases and $149.1 million to its dollar reserve.

That reserve reached $4.80 billion. Strategy says it is intended to support preferred dividends and interest payments. The company reported no Bitcoin purchases or sales during that week.

Chief Executive Phong Le has said Strategy expects to resume accumulating Bitcoin after STRC recovers toward its $100 stated amount. No purchase date or binding schedule has been announced. Future SEC filings will show whether the company buys more Bitcoin, sells additional common shares or continues directing capital toward STRC.

Kalshi has blocked customers in Washington while asking a King County judge to reconsider an injunction restricting its prediction markets.

The Aug. 21 motion argues that Washington gave competing exchange North American Derivatives Exchange, operating as OG, more favorable treatment. Kalshi and OG are both designated contract markets regulated by the Commodity Futures Trading Commission.

Judge John McHale is scheduled to consider Kalshi’s request on Sept. 2 without oral argument. The existing restrictions remain active while that request is pending.

Kalshi implemented Washington geofencing

The amended preliminary injunction required Kalshi to install IP address and residency-based controls by Aug. 19. A broader GeoComply system using multiple location sources must be operational by Sept. 2.

Kalshi could face a $120,000 daily penalty for failing to meet the second deadline unless it submits a sworn explanation for any delay. The company told the court it had already blocked Washington customers.

The order covers contracts linked to sports, elections, politics, entertainment, culture, technology and science, along with certain “mentions” markets. Record-preservation requirements also remain in place.

Washington Attorney General Nick Brown argues that those products amount to unlicensed gambling. As crypto.news previously reported, the Washington court rejected Kalshi’s initial jurisdiction argument and found the state was likely to succeed at the preliminary stage.

That finding is not a final judgment on every claim. Kalshi continues to argue that the federal Commodity Exchange Act gives the CFTC exclusive authority over contracts listed by registered exchanges.

Kalshi cites different treatment for OG

Kalshi’s reconsideration request relies on an Aug. 18 agreement between Washington officials and OG. Under that agreement, the state will not pursue civil or criminal enforcement involving OG’s federally traded event contracts until related appeals are resolved.

“The very event contracts that the state deemed intolerable from Kalshi are now freely available” through a competitor, Kalshi argued. The court has not accepted that characterization.

Kalshi says the agreement undermines Washington’s earlier claim that continued trading creates immediate consumer harm. It wants McHale to vacate parts of the injunction or provide a stay comparable to OG’s arrangement.

The company describes OG as “identically situated.” That remains Kalshi’s legal position rather than an established court finding. Washington may argue that procedural history or negotiated terms distinguish the two cases.

Michigan and Nevada restrictions remain active

Washington joins Michigan and Nevada among states currently restricting Kalshi. Courts in those jurisdictions have ordered location controls while state authorities pursue claims involving unlicensed sports wagering.

Kalshi has appealed or challenged those orders. Its central argument remains that federally regulated event contracts are derivatives, meaning state gambling laws cannot control their listing or trading.

Courts have not adopted one national answer. In contrast to Washington, a federal judge blocked Minnesota’s prediction-market prohibition after finding registered exchanges were likely to succeed on part of their preemption argument.

New York, Connecticut, Massachusetts, Ohio, Maryland, Utah and Arizona are also involved in pending disputes concerning prediction-market authority. The outcomes may depend on contract type, statutory wording and the procedural stage of each case.

CFTC prepares prediction-market safeguards

CFTC Chairman Michael Selig said on Aug. 20 that the agency would continue defending its claimed exclusive jurisdiction over federally regulated event contracts.

He also acknowledged concerns about retail protections. In official remarks, Selig said the commission would soon propose amendments to Parts 38 and 40 of its regulations.

The proposals are expected to address consumer protection, product governance, market design, listing standards and incentive programs. The CFTC has already proposed changes explaining how it could assess contracts involving gaming, war, terrorism, assassination or illegal activity.

Selig said the amendments would arrive “soon,” but the CFTC has not published their complete text or a formal release date.

Proposed regulations must still pass through the federal rulemaking process. They will not automatically reverse state court orders or resolve whether federal law displaces state gambling restrictions.

The next immediate events are Kalshi’s Sept. 2 reconsideration decision and geofencing deadline. Until a court grants relief, Washington customers will remain unable to access the restricted markets.

The Blockchain Association and Crypto Council for Innovation sued Illinois on Aug. 21 to block a 0.2% digital asset tax scheduled to take effect on Jan. 1, 2027.

The complaint was filed in the Seventh Judicial Circuit Court in Sangamon County. It names Illinois Revenue Director David Harris, Attorney General Kwame Raoul and Sangamon County State’s Attorney John Milhiser as defendants in their official capacities.

The filing is the second industry lawsuit challenging the Illinois crypto tax. The Digital Chamber brought a separate case in July.