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• Crypto drop is ‘very small’ relative to overall household net worth
• ‘Expect any drag on aggregate spending from the recent declines in cryptocurrency prices to be very small’ - Hatzius
The continuous downturn in the cryptocurrency market will not have any significant effect on the economy, even though US households own about one-third of the global digital assets, Goldman Sachs said in a report.
Although the overall crypto market value slumped to about $1.3 trillion, down from $2.3 trillion late last year, the recent selloff is “very small” relative to overall household net worth, which stood at $150 trillion in 2021.
“We, therefore, expect any drag on aggregate spending from the recent declines in cryptocurrency prices to be very small as well,” the economists led by Jan Hatzius wrote in a note on Thursday.
Goldman economists said the price declines have likely reduced US crypto holdings by about $300 billion, and currently, the total digital assets account for only 0.3% of household net worth.
In contrast, equities accounted for around 33% of the total household net worth at the end of last year, and the recent fall in stock markets has likely reduced household net worth by about $8 trillion, the note added.
“These patterns imply that equity price fluctuations are the main driver of changes in household net worth, while cryptocurrencies are only a marginal contributor,” Goldman Sachs economists wrote.
Although constricted financial conditions will result in a rapid slowdown in growth and spending this year, the report said, any incremental impact from the crypto selloff will likely be “modest”.
Picture Credit: Bitcoin News
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