Crypto Bloodbath Should Have Little Effect on US Households: Goldman Sachs

Crypto Bloodbath Should Have Little Effect on US Households: Goldman Sachs

The crypto market shed trillions of dollars in value over the past couple of weeks, inducing fears it could hurt the larger economy. But Goldman Sachs economists are not worried about any possible impacts on US households.

Goldman Sachs Weighs In

Goldman Sachs economists led by Jan Hatzius estimated in a note said that US households own about one-third of the global cryptocurrencies market, in which case, “the recent decline is very small relative to US household net worth.” The banking giant also does not expect any substantial drag on the spending habit of Americans from the recent decline in the cryptocurrency market.

Even as younger men were estimated to be the worst hit demographic in the recent bloodbath, the economists do not believe that this will trigger a spike in labor force participation among them. In fact, Goldman asserted that such scope is limited, citing that this demographic has already recovered to its pre-pandemic level. The letter further pointed out,

“Taken together, we continue to expect that tighter financial conditions will lead to a sharp slowdown in growth and spending this year, and declines in household wealth may very well incentivize some workers that left the labor market during the pandemic to return. However, any incremental impact from the recent declines in cryptocurrency prices will likely be modest.”

Crypto Market Recovers Ground

The sell-off induced significant pessimism in the crypto market, but many experts believe there are no signs of contagion from the dip that could affect the larger economy. University of Toronto economist Joshua Gans recently argued that most banks and other traditional financial institutions have only recently started to dabble in it. Hence, with such limited exposure to crypto price volatility, the effect appears to be limited.

The cryptocurrency market, on the other hand, has regained some lost ground despite failing to stage a powerful comeback. After hitting the lowest position since late 2020, Bitcoin touched $30,000 this week. Ethereum also surged past its psychological $2,000 mark as the week wraps.

Previous Post
Vitalik Buterin Confirms Ethereum’s Merge Could Happen in August
Next Post
Bill Gates Does Not Own Crypto Because It Doesn’t Have Product Value
Generated by Feedzy