A new Federal Reserve Bank of Cleveland working paper offers a provocative explanation for why cryptocurrency behaves so differently from traditional financial assets: Americans who buy crypto don’t simply have different demographics or risk appetites, they have radically different beliefs about digital assets’ future returns.

The finding could help explain both crypto’s persistent volatility and the way rallies can attract new buyers, potentially creating a feedback loop in which rising prices reinforce bullish expectations and pull more investors into the market.

Using repeated surveys of as many as 25,000 US households per wave, researchers Michael Weber, Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko found that…