Goldman Sachs believes the drop in cryptocurrency prices will not impact the US economy. The investment bank says the recent decline in the crypto market is “very small” compared to the US household net worth. It pointed out that a fall in crypto is unlikely to cause serious damage.
This month, the crypto market has seen a decline unlike anything before. It has seen a massive plunge this year with Bitcoin trading 57.83% lower than its November 2021 all-time high of $68,789. At the time of writing this article, the popular cryptocurrency was trading at $29,283, as per data from CoinMarketCap. The past two weeks have seen an acceleration in the crypto market’s downward trend. The alarm was sounded when Terra USD’s stablecoin UST depegged from $1 and its sister token LUNA crashed.
However, Goldman Sachs seems to have sent a positive vibe across markets. The bank’s researchers said that despite billions of dollars being wiped out in the crypto crash, there is nothing to worry about. The crash has brought a number of questions to the fore, including whether the drop in wealth will affect spending and labor supply in the United States. Goldman Sachs estimates that US households own about one-third of the global crypto market. As such, the recent decline is very small relative to US household net worth. The bank expects any drag on aggregate spending from recent declines in crypto prices to be very small.
Goldman Sachs says the impact on the US labor force participation rate would be small because of the labor force participation rate of younger men has fully recovered to its pre-pandemic level. In regards to the crypto pullback on the country’s economy, the bank highlighted a large share of crypto wealth is held by citizens of other countries.