Cleveland Fed Study Shows Bitcoin Gains Influence U.S. Households to Buy Crypto

A new Cleveland Fed working paper suggests Bitcoin’s past price performance can nudge U.S. households toward owning and buying crypto — a dynamic that could help explain how rallies attract retail demand. What the study did - Authors: Michael Weber, Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko. Paper released July 14, 2026 (Cleveland Fed working paper). - Data: recurring surveys with roughly 15,000–25,000 responses per wave from the Nielsen Homescan Panel. - Experiment: a randomized information trial run in Q2 2025 that showed participants one of several treatments (Bitcoin’s trailing 12‑month return of 14.3%, a Bitcoin price chart, S&P 500 returns, GameStop info, or an inflation forecast). Key findings - Information on Bitcoin’s trailing 12‑month return raised respondents’ desired crypto allocation by about 2 percentage points — a 47% jump from the control group’s average desired allocation of 4.3%. - Those shown Bitcoin return information were roughly 2.5 percentage points more likely to report buying crypto in later survey waves. Before the treatment, ~11% of participants held cryptocurrency; the researchers estimate the treatment increased the unconditional probability of buying crypto by about 23%. - The effect was strongest among nonowners who previously cited limited knowledge as the reason for avoiding crypto; people who already considered crypto a poor investment were largely unresponsive. - Participants exposed to Bitcoin information shifted desired portfolios partly by reducing cash/checking/savings allocations and raising desired stock allocations — suggesting the information boosted demand for risky assets more broadly. Expectations, uncertainty, and ownership - Owners and nonowners have very different return expectations. In Q3 2021 owners expected an average 12‑month return of 22% vs. 7% for nonowners. By 2025 both groups’ expectations fell: owners expected 13.8% and nonowners 4.7%. - Uncertainty is widespread: about 87% of nonowners answered “don’t know” when asked to forecast next‑year returns, versus 54% of owners. - Expected returns are strongly correlated with ownership: each additional percentage point of expected return is associated with a 0.8 percentage‑point increase in the probability of owning crypto. The authors stress this is an association rather than proof of causation for all ownership, but the randomized experiment provides causal evidence that specific historical‑return information can influence later choices. Spending effects - The paper also finds modest consumption responses. A simulated doubling of Bitcoin’s price would make a household whose entire financial portfolio is in crypto 1.4 percentage points more likely to buy a durable good — about a 7% increase from a ~20% baseline. The lift appeared strongest for electronics and appliances, weaker for cars and homes. There was little change in nondurable spending, which the authors interpret as households treating crypto gains more like lottery windfalls than permanent wealth increases. Interpretation and caveats - The authors note the results are consistent with a feedback mechanism: “Positive returns attract new participants, which raises the price further.” They frame this as a possible bubble mechanism, not a prediction that every Bitcoin rally will be self‑reinforcing. - Effects were statistically significant after pooling the Bitcoin treatment groups (reported p = 0.017), but only a minority of respondents changed ownership status between waves, so the overall margin of switches was small. - This is a preliminary working paper and does not represent an official Cleveland Fed or Federal Reserve System position. Why it matters - The study provides empirical evidence that simple historical-return information can change retail appetite for crypto, especially among those previously deterred by lack of knowledge. That helps explain why retail interest and search activity often follow market momentum, and why rallies can draw in fresh buyers who reallocate from cash and other safe holdings into risky assets. Bottom line: even modest, clearly presented information about Bitcoin’s recent returns can lift desired crypto allocations and prompt some households to buy — a dynamic that may amplify retail flows during rallies and contribute to momentum-driven price moves.