A Federal Reserve Bank of Cleveland study finds that showing households bitcoin's past gains raises the odds they later buy into crypto, pointing to a mechanism behind how speculative rallies feed themselves. The finding lands the same week bitcoin posted its sharpest jump in three years, driven by a short squeeze, heavy ETF inflows and hopes for friendlier U.S. crypto rules.
Telling U.S. households that bitcoin had gained 14.3% over the previous year raised their later odds of owning crypto by about 2.5 percentage points, a 23% jump from the roughly 11% who already held it before the test. Researchers split participants in a 2025 survey into a control group and six groups shown different information, including bitcoin's return, its price chart, the S&P 500, GameStop or the Federal Reserve's inflation forecast.
Two of those groups were shown bitcoin data directly. The group told bitcoin's return saw ownership odds rise 2.41 percentage points, while the group shown a price chart rose 2.48 points, based on 5,352 respondents tracked from the second through fourth quarters of 2025. The same treatment also lifted desired crypto allocations by about 2 percentage points from a 4.3% average in the control group, largely by pulling money out of cash and savings accounts.
Being told of bitcoin's gains also raised expected returns over the following year by 3.2 percentage points, versus 1.2 points for the chart-only group. The effect was strongest among people who said they avoided crypto because they lacked knowledge of it, with no significant impact on those who already viewed it as a bad investment. According to the paper's authors: "Positive returns attract new participants, which raises the price further", a dynamic they say helps explain how bubbles form.
Bitcoin's own rally mirrors the pattern
The study's timing lines up with bitcoin's actual trading this month. The asset jumped more than 23% in a single week, its biggest move in three years, breaking above the closely watched $77,500 level.
A short squeeze forced traders to close billions of dollars in bearish bets as the price broke out, and the move was reinforced by $1.91 billion of net inflows into spot bitcoin ETFs during the week of Aug. 17-21, pushing the funds' total assets to $96.07 billion. Large sell orders are now concentrated near $80,000, a level traders are watching as the next hurdle.
Regulatory hopes add support
Bitcoin also drew strength from Washington. It rose 1% to $77,319.1 on Monday after President Trump called on lawmakers to pass the Clarity Act, a bill meant to set a broader U.S. regulatory framework for crypto that has stalled in Congress for more than a year.
Traders also pointed to the U.S. Treasury's move to double its buybacks of longer-dated notes, a liquidity boost tied to what some call the debasement trade. Passage of the Clarity Act remains unclear even after the president's call for lawmakers to act.
Sources: Federal Reserve Bank of Cleveland, U.Today, Investing.com
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