Crypto gains didn't hold back hiring, and losses won't hurt the labor market: Goldman

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Crypto traders have had a rough 2022, but economists at Goldman Sachs say these declines might not be enough to bring workers who realized they were NGMI back to work.

Goldman's note specifically looked at labor force participation among young males — the demographic most likely to have invested, traded, or used cryptocurrencies — with the premise being that if appreciating crypto assets helped some young men quit their jobs, falling crypto assets would nudge those same men into looking for work.

They found that employment levels among younger males had already recovered to pre-pandemic levels, suggesting that cryptocurrency wealth has only played a “limited role in discouraging” work so far.

“[T]he recent declines in crypto prices will therefore provide a limited boost to labor supply going forward,” the Goldman analysts wrote.

Young males are most likely to have transacted in cryptocurrencies. (Source: Pew Research Center, Goldman Sachs Global Investment Research)
Young males are most likely to have transacted in cryptocurrencies. (Source: Pew Research Center, Goldman Sachs Global Investment Research)

The same team — led by Goldman's chief economist Jan Hatzius — wrote last year about lifestyle trends that could create longer-run changes in employment. Pointing to the r/Antiwork reddit thread, the bank’s economists said aspirations for a “work-free life” among prime-age workers could impact labor force participation.

“We see some risk that some workers will elect to remain out of the labor force for longer, provided they can afford to do so,” Goldman wrote on November 11.

Since then, the prices of Bitcoin and Ethereum have fallen by more than half. The collapse of prominent stablecoin project UST has underscored the volatility in crypto markets.

The economy will survive crypto winter

Hatizus and his team also believe the U.S. economy should be well-insulated from the wealth effect of falling crypto prices.

“Any incremental impact from the recent declines in cryptocurrency prices will likely be modest,” Goldman Sachs concluded.

Although the total market cap of cryptocurrencies (among the 200 largest assets) has declined by over $1 trillion from its peak last year, Goldman estimates that only about a third of the global market appears to be owned by households in the U.S.

In contrast, the bank estimates that stocks account for a much larger share — about 33% — of household net worth. The spill in equities year-to-date, the note suggests, is therefore the larger risk to household spending as recession risks loom.

Based on estimates that U.S. households only hold about a third of the world's cryptocurrencies (among the top 200 assets), Goldman Sachs guesses that cryptocurrency holdings currently account for only 0.3% of household net worth. (Source: Goldman Sachs Global Investment Research)
Based on estimates that U.S. households only hold about a third of the world's cryptocurrencies (among the top 200 assets), Goldman Sachs guesses that cryptocurrency holdings currently account for only 0.3% of household net worth. (Source: Goldman Sachs Global Investment Research)

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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