In the Fed researchers' own earlier survey, more than half of the people who already owned crypto could not name a return they expected from it.
Handing households one number — what Bitcoin had returned over the previous 12 months — got some of them buying cryptocurrency, the authors of a Fed study say.
The researchers assigned households at random to be given information on one of four subjects: Bitcoin, stocks, GameStop or inflation. Those shown Bitcoin's return over the preceding 12 months raised the share of their portfolio they said they wanted in crypto by about 2 percentage points, roughly 47% more than the 4.3% share wanted by households given no such figure. The crypto they actually went on to buy climbed by about 2.5 percentage points.
Not everyone moved. Most of the response came from people who said they stayed out of crypto for want of enough information about it, while households that had already decided crypto is a poor investment generally showed no reaction to the same figure.
Expectations about crypto returns were largely unformed to begin with. In a 2021 survey run for the study, 87% of people who owned no crypto said they had no idea what return the asset might deliver over the coming year, and among owners 54% said the same. Those willing to name a figure split widely: owners put the coming year's return at an average of 22%, against 7% among non-owners, and owners also rated crypto the safer bet.
Ownership tracks those beliefs closely. In the survey data, each additional percentage point of return a person expected from crypto came with a 0.8-percentage-point rise in the likelihood that they held it, and expectations about return and about risk together accounted for far more of the differences in ownership than measurable traits such as age, income and gender did. Stocks, bonds and gold run the other way: there an investor's demographic and financial profile usually explains much more than any gap in expected returns.
From those patterns the researchers sketch a possible engine for speculative bubbles: earlier profits in crypto pull in fresh investors, whose buying lifts prices, a rise that may in turn draw yet more buyers. Some of the swings in crypto prices, they suggest, trace back to investors disagreeing and learning rather than to market fundamentals alone.