A new working paper from researchers at the Federal Reserve Bank of Cleveland argues that much of crypto’s unusual behavior may come down to how people form beliefs about digital assets—more than standard demographic or financial factors. In their analysis of household survey data and a randomized information experiment, the authors find that expectations about future crypto returns strongly track who owns cryptocurrency, and that learning about recent Bitcoin performance can meaningfully change both planned allocations and actual buying.

The work, titled “Do You Even Crypto, Bro? Cryptocurrencies in Household Finance”, also points to a mechanism that could help explain crypto’s persistent volatility: when prices rise, they may…