The myth of crypto wealth spent on Lamborghinis and bling is tenacious. Yet research reveals that these gains primarily fuel the stone, boosting real estate markets where crypto is popular.
Crypto wealth is revolutionizing consumption habits in the United States
There is no shortage of success stories of investors who have made their fortune thanks to cryptocurrencies on social networks. But how is this financial windfall actually spent? This is the question that researchers from several American and British universities tried to answer.
By analyzing the data transactions of millions of Americans between 2010 and 2023, they discovered that each dollar of capital gains in crypto generated approximately 9 cents in additional spending. This wealth effect is twice as large as for stocks, but three times smaller than for lottery winnings.
“ Our estimates indicate that spending on cryptocurrencies remains closer to the patterns seen with traditional stock investments“, explains Darren Aiello, co-author of the study.
Real estate, a popular refuge for “crypto-millionaires”
Far from the clichés, the majority of spending does not involve flashy purchases like luxury cars. Crypto investors actually allocate a significant portion of their earnings to acquiring real estate, driving up prices in regions where they are adopting cryptos en masse.
Thus, the researchers found that in 2017, a banner year for Bitcoin, real estate prices increased 43 basis points faster in counties with a high concentration of cryptocurrency holders. Over the decade 2013-2023, each dollar gained in crypto translates into a 15 cent increase in the median house price in the following 3 months.
Furthermore, by analyzing withdrawals of more than $5,000 made on exchanges, the authors notice a notable increase in real estate expenses in the following year. “For each household having withdrawn $5,000, one in 20 became a homeowner for the first time“, specifies Jason Kotter, professor of finance.
In conclusion, if the macroeconomic impact of cryptos still remains limited in the United States, it is no less real and constantly increasing. The recent arrival of Bitcoin ETFs could further amplify this phenomenon in the years to come, by democratizing access to this asset class.
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