Fed study finds Bitcoin price gains attract new crypto investors

Bitcoin price increases lead to more new crypto owners

A recent experiment by the Federal Reserve Bank of Cleveland found that showing people Bitcoin’s past price gains makes them more likely to buy crypto later. The study showed that participants who saw Bitcoin’s performance became more optimistic about crypto and were about 23% more likely to own it in a follow-up survey.

The experiment tested how information about Bitcoin’s past returns affects people’s decisions to invest in crypto. Researchers divided participants into groups and gave each group different financial information, including Bitcoin’s 12-month return, a Bitcoin price chart, or details about other assets like stocks.

The results suggest that rising Bitcoin prices can attract new investors, especially those who know little about crypto.

Key findings from the Fed experiment

• Participants shown Bitcoin’s 12-month return of 14.3% were 23% more likely to own crypto later.
• The effect was strongest among people with limited crypto knowledge.
• Seeing Bitcoin’s gains raised expected future returns by 3.2 percentage points.
• Participants wanted to put 2 percentage points more of their money into crypto after seeing the gains.
• The study is preliminary and does not prove every Bitcoin rally will create the same demand.

How the experiment worked

In the second quarter of 2025, researchers split participants into groups. One group was told Bitcoin had returned 14.3% over the past year. Another group saw a Bitcoin price chart for the same period. Other groups received information about the S&P 500, GameStop, or inflation, while a control group got no extra information.

Those who saw Bitcoin’s return or chart expected higher future returns and wanted to invest more in crypto. The increase in desired crypto investment came mostly from money they would have kept in cash or savings accounts.

A follow-up survey found that participants who received Bitcoin information were about 2.5 percentage points more likely to own crypto later. Since about 11% of respondents owned crypto before the experiment, this change represents a 23% increase in the likelihood of ownership.

What the results mean

The study provides rare experimental evidence that past price gains can influence future investment decisions. This effect was strongest among people who knew little about crypto, suggesting that price rallies may attract undecided investors more than those who already have strong opinions about crypto.

However, the study does not show whether every Bitcoin rally will create the same level of new demand or how much those new investments might affect prices.

Crypto owners have different expectations

The research also used data from the Nielsen Homescan Panel, which tracks spending and financial behavior of U.S. households. It found that crypto owners expect much higher returns than non-owners.

In 2021, crypto owners expected the asset to return about 22% over the next year, while non-owners expected only 7%. By 2025, the gap remained: owners expected 13.8% returns, and non-owners expected 4.7%.

Demographics also played a role. People under 40 were 13 percentage points more likely to own crypto than those over 60. Men were about 4 percentage points more likely to own crypto than women. Higher income and financial wealth were also linked to crypto ownership.

However, beliefs about returns and risk had twice the impact of demographics in explaining who owned crypto.

Bitcoin gains also affect spending

The study found that Bitcoin price increases can change what crypto-owning households buy. When Bitcoin prices rose, these households were more likely to purchase durable goods like computers and refrigerators. The effect was strongest for large, one-time purchases and faded after a quarter.

This spending pattern was different from how traditional financial wealth, like stocks and bonds, affects spending. Gains in stocks and bonds were more likely to increase routine expenses like food and utilities.

What is still unclear

• The study is preliminary and does not represent the official views of the Federal Reserve.
• It does not show whether every Bitcoin rally will create the same level of new demand.
• The research does not quantify how much new investments might move Bitcoin prices.
• The spending effects of Bitcoin gains may not last beyond a single quarter.

Why this matters for crypto investors

The study suggests that Bitcoin price increases can attract new investors, especially those who are less familiar with crypto. This could help explain why price rallies sometimes lead to more buying activity. However, the effect may be temporary and strongest among undecided investors rather than those who already have strong opinions about crypto.

The findings also show that crypto owners have very different expectations about returns compared to non-owners. This divide could influence how different groups respond to market changes.

Sources

• CryptoSlate