A recent study has found that as cryptocurrencies become an important part of Americans’ investment portfolios, their impact extends beyond digital transactions to affect the real estate market and household spending.
The study, originally reported by Bloomberg, examined bank and credit card data from millions of American households to analyze how cryptocurrency wealth spills over into the US economy. The research found that the increase in cryptocurrency wealth leads to a significant growth in discretionary spending and housing expenditure.
This response to the growth of cryptocurrency wealth exceeds the similar response observed from traditional stock returns. The research report states that every dollar of unrealized cryptocurrency wealth growth, on average, leads to a 0.09 dollar increase in marginal propensity to consume (MPC), “exceeding previous estimates for unrealized stock returns” (stocks at 0.05 dollars, lottery at 0.52 dollars).
Although it is common to see investors profiting from cryptocurrencies boasting on social media, not all the money is squandered on Lamborghinis and luxury goods. Some of the funds are used to purchase homes, thereby driving up real estate prices in cryptocurrency-popular areas.
Cryptocurrencies have fueled the housing prices in certain markets. The paper explains how the increase in cryptocurrency holdings is further associated with the shift from renting to homeownership, which in turn drives up local real estate prices. This pattern is particularly evident in areas with higher concentrations of cryptocurrency asset investments, with researchers noting, “Counties in California, Nevada, and Utah have the highest per-capita cryptocurrency values.”
The researchers also tracked investors who withdrew at least $5,000 from cryptocurrency brokerage platforms between 2018 and 2023 (with about 90% coming from Coinbase). The analysis showed that total spending increased by around $5,754 in the year after large withdrawals by US citizens. While mortgage payments remained unchanged in the six months before the large withdrawals, they significantly increased after the withdrawals occurred.
This study further reveals that cryptocurrency investors typically diversify their portfolios, including both digital and traditional assets. Many investors profiting from cryptocurrency earnings reinvest in the traditional financial market, indicating complex financial behavior and an understanding of overall risk allocation.
The research findings of this report suggest that incorporating cryptocurrencies into the mainstream financial system may have lasting effects on economic policies and personal financial strategies. The authors of the paper concluded:
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