A working paper from the Federal Reserve Bank of Cleveland provides experimental evidence that Bitcoin price gains can encourage new investors to enter the cryptocurrency market, pointing to a feedback loop in which rising prices help generate further demand.

The study, "Do You Even Crypto, Bro? Cryptocurrencies in Household Finance", examined how households respond to information about crypto returns. Researchers randomly exposed participants in a 2025 survey to information about Bitcoin, the S&P 500, GameStop, or the Fed's inflation outlook. As with other Reserve Bank working papers, the analysis is preliminary and circulated to stimulate discussion, so the findings do not represent official Federal Reserve policy positions.

Participants who were shown that Bitcoin had gained 14.3% over the previous 12 months were about 2.4 percentage points more likely to report owning crypto in a follow-up survey — a roughly 23% increase from the 11% ownership rate recorded before the experiment. A similar effect appeared among participants who were shown a Bitcoin price chart.

Exposure to Bitcoin's gains also increased respondents' desired crypto allocation by about 2 percentage points, up from an average of 4.3% in the control group. Much of that allocation came at the expense of cash and bank deposits. The question of how households respond to past returns carries practical weight now that crypto exposure is reachable from ordinary brokerage accounts, after U.S. regulators approved spot Bitcoin exchange-traded funds in January 2024.

Expectations shifted as well. Respondents shown Bitcoin's positive performance raised their expected crypto returns over the following year by 3.2 percentage points, while the price-chart treatment lifted expectations by 1.2 points. The effect was strongest among respondents who said they had avoided crypto because they lacked sufficient knowledge about it.

According to the researchers, the findings point to a potential feedback loop in speculative markets: rising prices attract new participants, which can generate further demand and push prices higher still.

"Positive returns attract new participants, which raises the price further," the authors wrote, adding that investors appeared more likely to extrapolate past gains than to expect prices to revert toward their historical mean. That extrapolation tendency echoes a broader result in household-finance research that personally experienced returns, more than long-run averages, shape households' willingness to take risk.

The study covered 5,352 respondents across the second through fourth quarters of 2025 and measured self-reported crypto ownership rather than actual transaction data, leaving open for future work the question of whether the reported entry shows up in real exchange and brokerage records.

The finding offers a data-backed explanation for why strong Bitcoin rallies can become self-reinforcing, while also highlighting the risk that rising expectations, rather than fundamentals, can help fuel speculative bubbles.