A recent study found that as cryptocurrencies become an important part of Americans' investment portfolios, the impact is not limited to digital transactions but is also having a real impact on the housing market and household spending.

The paper, first reported by Bloomberg, looked at bank and credit card data from millions of U.S. households to analyze how cryptocurrency wealth spills over into the real U.S. economy. The findings found that increases in cryptocurrency wealth lead to significant increases in discretionary spending and residential spending.

This response to cryptocurrency wealth growth exceeds similar responses observed from traditional stock returns. The research report points out that each dollar of unrealized cryptocurrency wealth increases, on average, $0.09 in marginal propensity to consume (MPC), "exceeding most previous estimates of unrealized stock returns" ($0.05 for stocks, Lotto is $0.52).

While it’s common to see investors who have profited from cryptocurrencies shouting about it on social media, not all the money has been squandered on Lamborghinis and luxury goods: some of the funds have been used to buy houses, thus promoting crypto Real estate markets in areas where money is popular.

“If households tend to view cryptocurrencies like gambling, then we would expect them to spend their earnings in a manner similar to lottery winners,” said Dr. Lee, assistant professor of finance at Brigham Young University’s Marriott School of Business and one of the paper’s authors. Darren Aiello said in an interview: "In contrast, our estimates suggest that household consumption patterns of cryptocurrency earnings are more like what we see from traditional stock investments."

Cryptocurrencies fuel housing prices in some markets

Notably, the study details how increased cryptocurrency holdings are further linked to the shift from renting to owning a home, which in turn drives up local real estate prices.

This pattern is particularly evident in areas with high concentrations of crypto-asset investment, highlighting the broad economic impact of sizable crypto assets on local housing markets. The researchers note: “The highest per capita cryptocurrency values ​​are concentrated in California, Nevada, and Utah. County of the state.”

Researchers also tracked investors who withdrew at least $5,000 from cryptocurrency brokerage platforms between 2018 and 2023 (about 90% of which came from Coinbase). The analysis showed that in the year after the large withdrawal, Americans made a total of Expenses increased by approximately $5,754 from the previous year. While mortgage payments remained flat in the six months before the big draw, they rose significantly after the draw occurred.

The study further reveals that cryptocurrency investors typically diversify their portfolios to include digital and traditional assets. Many investors who profit from cryptocurrency returns reinvest in traditional financial markets, demonstrating sophisticated financial management behavior and an understanding of overall risk allocation.

The report’s findings suggest that integrating cryptocurrencies into the mainstream financial system could have lasting impacts on economic policy and personal finance strategies. The authors of the paper concluded:

“While the spillover effects of cryptocurrencies on other financial assets may be limited, our findings show that cryptocurrency investments do affect real assets. Therefore, the distribution of cryptocurrency wealth has important implications for the real economy.”

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This article Cryptocurrency wealth spurs increased consumer spending and pushes up housing prices in some markets, study shows Cryptocurrency wealth originally appeared on Zombit.