Cryptocurrency investment and home prices
On the 17th, the National Institute of Economic Research in the United States released a paper titled “The Impact of Crypto Asset (Virtual Currency) Wealth on Household Consumption and Investment.” He said there is a correlation between household cryptocurrency assets and house prices in certain regions.
Researchers analyzed bank account and credit card transaction transaction data from millions of U.S. households to examine how household-owned cryptocurrency assets impact the broader economy. ing.
Specifically, we explored how household consumption responds to fluctuations in cryptocurrency asset values and assessed the impact on local real estate market prices.
The amount of virtual currency assets is identified from remittance data to major virtual currency exchanges, etc., and the amount of virtual currency assets is estimated based on the timing of transactions.
According to the study, when cryptocurrencies surged in 2017, home prices rose by about 0.46% in areas with high cryptocurrency penetration compared to other areas.
In 2017, the Bitcoin (BTC) price has risen significantly from the lowest price of 80,000 yen to the highest price of 2 million yen. As a result, those who invested in the early stages of the asset life cycle were able to significantly increase their asset values with the legal tender equivalent of cryptocurrencies.
When evaluated in dollar terms, housing prices in areas where households had abundant cryptocurrency assets rose by about 260,000 yen (about $1,878) in the nine months following the 2017 surge.
The researchers also say that the marginal propensity to consume (MPC) due to unrealized gains in cryptocurrencies is more than double that of stocks. On the other hand, it was lower than the MPC from lottery winnings.
What is Marginal Propensity to Consume (MPC)?
In economics, the ratio of changes in consumption to changes in income. MPC indicates the rate at which, given a certain amount of additional income, a portion of that income is devoted to consumption.
“Effect on the real economy”
Households holding cryptocurrencies were also redeeming cryptocurrency profits for things like buying a home or upgrading their existing home.
The researchers argue that this has increased housing spending, putting upward pressure on local housing prices in areas with high exposure to cryptocurrencies. In the conclusion section he said:
Although the ripple effects of cryptocurrencies on other financial assets may be limited, the results of our study show that investing in cryptocurrencies has an impact on real assets.
It’s like arguing that cryptocurrency investment will affect other real economies.
Voices Concerned About Repercussions on the Financial System
Many believe that last year’s turmoil in the cryptocurrency market, including the collapse of the cryptocurrency exchange FTX, had limited impact on the wider economy outside of it.
Meanwhile, advisers to the US president released a roadmap for de-risking cryptocurrencies in January. He claimed that banks and other traditional financial institutions had limited opportunities to come into contact with cryptocurrencies, which prevented them from spreading to the wider financial system.
Advisors have expressed concerns about deepening the ties between the cryptocurrency sector and the financial system.
connection: US Biden Administration Announces Roadmap for Risk Mitigation of Cryptocurrencies