Crypto Bleed Won’t Ruin U.S. Economy: Goldman Sachs


Keys to take

  • Goldman Sachs does not believe that the downward momentum in the cryptocurrency market will have a major impact on the economy.
  • Investment bank economists have observed how small cryptocurrencies are relative to the family’s total net worth.
  • The cryptocurrency market is in its seventh month of weak price action, with the global cryptocurrency market cap almost 60% below its peak.

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The update occurs when cryptography continues its downward trend for months.

Goldman Sachs discusses cryptocurrency crash

Although the cryptocurrency market has been in decline for months, Goldman Sachs does not believe that the bleeding has a significant impact on the economy.

In a research note distributed to customers, economists led by Jan Hatzius noted that the decline in the cryptocurrency market is “very small” compared to the total net worth of the family. The global cryptocurrency market peaked in November 2021, but space suffered a slow price action for seven months. However, Goldman economists have pointed out that this fall is small compared to the $ 150 trillion that makes up the global net worth of the household.

Due to the relatively small size of the digital asset space, the note says spending is unlikely to see a significant drop as a result of the ongoing cryptographic decline. “Therefore, we expect any burden on aggregate spending due to recent declines in cryptocurrency prices to be very small,” he read.

Economists say cryptocurrencies account for about 0.3% of households’ net worth, while equities account for about 33%. Although most cryptocurrencies have performed poorly throughout 2022, many stocks have also been hit hardest in recent weeks for fear that the Big Tech bubble will finally burst. Last month, Netflix suffered its worst day in 18 years after falling 37 percent in a earnings report that revealed it had lost 200,000 subscribers in the first quarter of the year. Companies like Microsoft, Tesla, Amazon and Alphabet have also lost billions of dollars in recent weeks.

In the note, Goldman noted that “fluctuations in stock prices are the main driver of changes in household net worth, while cryptocurrencies are only a marginal contributor.” Economists also pointed to the typical demographics of cryptocurrency investors, which include young men “less affected by fluctuations in wealth.”

Although Goldman has indicated that he thinks the crypto crash won’t have a big impact on the economy, many of the most ardent believers in cryptography have been hit hard in the recent liquidation. The spectacular collapse of Earth last week caused a $ 40 billion elimination when UST lost its point and LUNA fell to zero, causing an entire ecosystem to collapse. In addition to Earth, many other assets are trading from their highs. Bitcoin is close to 57% of its November peak, Ethereum is almost 60% down and most lower limit assets have been much worse for them.

According to CoinGecko, the global market capitalization of cryptocurrencies is currently $ 1.3 trillion, almost 60% less than its peak of $ 3 trillion in November 2021.

Disclosure: At the time of writing, the author of this piece had ETH and several other cryptocurrencies.

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