Cleveland Fed Paper Finds Bitcoin Gains Can Spur Fresh Crypto Demand

A new working paper from the Federal Reserve Bank of Cleveland suggests that recent Bitcoin price gains do more than shape how U.S. households view crypto—they may also prompt additional buying. Drawing on repeated survey waves from the Nielsen Homescan Panel, with roughly 15,000 to 25,000 respondents per round, the authors find that people shown strong Bitcoin performance over the prior 12 months raised both their intended crypto allocation and their reported likelihood of purchasing crypto assets. In a randomized information experiment launched in Q2 2025, respondents were shown information about either Bitcoin, the S&P 500, GameStop, or inflation forecasts. Those assigned to the Bitcoin condition saw either a 14.3% one-year return figure or a price chart. After exposure, respondents increased their expected allocation to crypto assets by about 2 percentage points on average—about a 47% jump relative to the control group's average target allocation of 4.3%. Part of the increase appeared to come from reduced intended allocations to cash, checking accounts, and savings accounts. Respondents also lifted their target allocation to stocks, suggesting the information boosted broader risk appetite, not just interest in crypto. The paper also documents a persistent gap in return expectations between crypto holders and nonholders. In Q3 2021, those who already held crypto expected an average return of 22% over the next year, versus 7% for nonholders. By 2025, expectations declined for both groups but remained far apart: 13.8% for holders and 4.7% for nonholders. The study finds the link between return expectations and crypto ownership is stronger than correlations with demographic factors such as age, income, gender, or wealth. Its estimates suggest that each 1 percentage point increase in expected return is associated with a 0.8 percentage point higher probability of holding crypto assets, while noting this is primarily correlation and does not prove optimistic beliefs fully explain ownership. Follow-up surveys indicate that respondents who received Bitcoin return information were about 2.5 percentage points more likely to purchase crypto assets. Before the experiment, around 11% of participants held crypto. The authors estimate the information exposure raised the unconditional probability of purchase by roughly 23%. Because relatively few individuals changed positions across survey periods, the team pooled two groups of Bitcoin-transaction samples to improve statistical power, reporting significance at p=0.017. The biggest behavioral response came from nonholders who previously avoided crypto due to limited understanding; respondents who already believed crypto was a poor investment showed smaller changes. The authors argue the findings are consistent with a potential demand-feedback channel: price increases lift return expectations, draw in new participants, and generate additional demand. They describe this as a possible bubble mechanism, while stopping short of claiming that every Bitcoin rally is self-reinforcing. Consistent with other Federal Reserve surveys, the paper notes that Americans' primary reason for participating in crypto markets remains investment rather than payments. The study also explores whether Bitcoin gains affect household consumption. Estimates suggest that if a household allocated all financial assets to crypto, a doubling in Bitcoin's price would raise the probability of purchasing durable goods by 1.4 percentage points, with stronger effects for items such as computers and refrigerators and weaker effects for cars and housing. The authors interpret this as a sign some households may treat crypto gains as a one-time windfall rather than a lasting increase in wealth. The paper remains a working draft, and its conclusions reflect the authors' research rather than an official Federal Reserve policy position.