Investment bank Goldman Sachs has said that it’s unlikely that the drop in cryptocurrency prices will impact the U.S. economy.
In a Thursday research note, the New York City-based multinational said that “the recent decline [in cryptocurrency prices] is very small relative to U.S. household net worth” and therefore unlikely to cause serious damage.
The cryptocurrency market has tumbled massively this year: Bitcoin, the largest digital asset by market cap, is right now trading for $29,006.89, according to CoinMarketCap. That’s 57.83% lower than its November 2021 all-time high of $68,789.63.
And the market’s downward trend has accelerated the past two weeks because of the collapse of two major cryptocurrencies—TerraUSD (UST) stablecoin and its sister token LUNA.
But researchers at the investment bank say that although billions of dollars of investors’ cash has been wiped out, and U.S. households hold a lot of crypto, there is no cause for concern.
“This [the crash] has prompted questions about whether this drop in wealth might affect spending and labor supply in the US,” the note said.
“Our rough estimate is that U.S. households own about one-third of the global crypto market. If so, the recent decline is very small relative to US household net worth, which stood at $150 trillion as of last year. We therefore expect any drag on aggregate spending from the recent declines in cryptocurrency prices to be very small as well,” it continued.
The note added that the impact on the U.S. labor force participation rate would be small too because the labor force participation rate of younger men—who mostly hold cryptocurrencies—has already fully recovered to its pre-pandemic level.
“When considering the impact of the crypto pullback on the U.S. economy, a major caveat is that a large share of crypto wealth is held by citizens of other countries,” the note also said.
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