A new working paper from researchers at the Federal Reserve Bank of Cleveland argues that much of crypto’s unusual behavior may come down to how people form beliefs about digital assets—more than standard demographic or financial factors. In their analysis of household survey data and a randomized information experiment, the authors find that expectations about future crypto returns strongly track who owns cryptocurrency, and that learning about recent Bitcoin performance can meaningfully change both planned allocations and actual buying.

The work, titled “Do You Even Crypto, Bro? Cryptocurrencies in Household Finance”, also points to a mechanism that could help explain crypto’s persistent volatility: when prices rise, they may reinforce bullish expectations, drawing in additional buyers and further amplifying movements.

Key takeaways

• Return expectations explain crypto ownership better than demographics. The paper finds expected returns and perceived risk account for more variation in ownership than age, income, or gender.
• Many non-owners lack clear beliefs about crypto returns. In a 2021 Fed survey, most non-owners reported they did not know what return to expect over the following year.
• Information about recent Bitcoin performance changes behavior. In a 2025 randomized trial, showing households Bitcoin’s past 12-month return increased desired crypto allocations and subsequent purchases.
• Crypto gains may be treated like “gambling income,” not durable wealth. The study links BTC price increases to more durable-good spending, but not lasting increases in consumption.

Beliefs, not just backgrounds, shape who buys crypto

The researchers—Michael Weber, Bernardo Candia, Olivier Coibion, and Yuriy Gorodnichenko—use repeated survey waves covering up to 25,000 U.S. households per wave. Their central finding is that what people think crypto returns will be does a far better job of explaining ownership than observable characteristics.

According to the paper, expected returns are particularly influential: a one-percentage-point increase in an individual’s expected crypto return corresponds to a 0.8-percentage-point rise in the probability of owning cryptocurrency. When expectations about returns are combined with expectations about risk, the explanatory power rises further—surpassing the impact of factors like age, income, and gender.

This makes crypto an outlier compared with traditional asset categories such as stocks, bonds, and gold. For those markets, demographic and financial characteristics tend to matter more for ownership patterns than differences in return expectations. The paper’s implication is that crypto participation is driven less by “who you are” and more by “what you believe crypto will do.”

Large gaps in understanding may widen the volatility loop

The study also highlights how uneven knowledge and beliefs are across the population. In a 2021 Federal Reserve survey referenced by the authors, 87% of respondents who did not own crypto said they did not know what return to expect from it over the following year. Among crypto owners, the figure was still high—54% reported not knowing what return to expect.

For those who were willing to make a forecast, the study describes a substantial divergence. Crypto owners expected an average 22% return over the next year, compared with 7% among non-owners. Owners also tended to perceive crypto as less risky than non-owners did.

The authors connect this belief gap to a potentially self-reinforcing market dynamic. If rising prices strengthen optimistic expectations, those expectations can attract new participants whose buying then supports higher prices. In the paper’s words, “Positive returns attract new participants, which raises the price further.”

Notably, this mechanism does not require the underlying asset fundamentals to be the only driver of price action. Instead, it suggests that disagreement and learning—how investors update beliefs based on past outcomes—can become a major source of volatility.

Experimental evidence: showing Bitcoin’s past performance moves allocations and purchases

The paper’s most actionable part for market participants comes from a randomized information experiment. In 2025, the researchers randomly assigned households to receive information comparing Bitcoin with other topics, including stocks, GameStop, and inflation. Participants who were shown Bitcoin’s previous 12-month return increased their desired crypto portfolio allocation by roughly 2 percentage points.

The authors report this as about a 47% increase relative to a 4.3% desired allocation in the control group. They also find an increase in actual subsequent crypto purchases of about 2.5 percentage points.

Crucially, the effect was concentrated among people who said they did not own crypto because they felt they lacked sufficient information. Those who already believed crypto was a bad investment did not respond in the same way to the informational treatment.

Framed for readers, the experiment implies that retail demand may not be driven solely by price headlines or broad narratives. It may also be driven by what people are prompted to focus on—specifically, whether they are given recent performance data that reshapes expectations about future returns.

What happens to consumption when crypto wealth rises?

Beyond trading behavior, the paper examines whether crypto gains translate into broader spending patterns. The authors report a spillover effect from crypto price changes into household consumption, particularly for durable goods. When BTC doubled in price, a household whose entire financial portfolio was in crypto became 1.4 percentage points more likely to buy a durable good.

They describe this as roughly a 7% increase relative to the unconditional probability of such a purchase. However, the effect did not persist into ordinary spending, and the pattern leads to a sharper interpretation: crypto gains appear to function more like “gambling income” or lottery winnings than as a steady, confidence-building increase in long-term wealth.

That distinction matters because it suggests crypto’s influence may be episodic. Even if price surges provide short-term boosts to certain spending categories, they may not reshape households’ longer-term financial behavior in the same way as more stable forms of wealth.

For investors and builders, the study’s core warning is uncomfortable but practical: if participation is belief-driven and information-sensitive, volatility may remain structurally high. Readers should watch next for how new retail entrants interpret Bitcoin’s recent performance, and whether changes in public messaging or access to return information amplify the feedback loop the paper describes.

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

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.