Crypto Rich vs. Lottery Winners: Bloomberg Explains How Spending Habits Differ

The rise of cryptocurrencies has not only created a new asset class but has also given birth to a new generation of wealthy individuals. As reported by Bloomberg News, a group of researchers has delved into the fascinating world of crypto wealth and its impact on the US economy. Their findings shed light on how the so-called “crypto rich” are spending their newfound fortunes and the ripple effects this has on various sectors, particularly the housing market.

According to the Bloomberg article, the researchers found that crypto gains have led to a significant increase in household consumption. Over the past decade, this extra spending amounted to approximately $30 billion. Interestingly, for every dollar of unrealized crypto gains, households spent about nine cents. While this may seem like a small figure, it’s nearly double the marginal propensity to consume compared to stock market returns, as noted by Bloomberg.

However, the spending habits of crypto winners differ from those of lottery winners. The researchers discovered that household spending from crypto gains more closely resembles the patterns seen in traditional equity investments rather than the splurges associated with sudden windfalls like lottery winnings, as reported by Bloomberg.

One of the most intriguing findings from the research, as mentioned by Bloomberg, is the impact of crypto wealth on local housing markets. The researchers found that a significant portion of crypto gains were channeled into real estate, particularly in regions where cryptocurrencies are popular, such as parts of California, Nevada, and Utah.

To quantify this effect, the researchers looked at the crypto boom of 2017, when Bitcoin’s price skyrocketed by nearly 1,400%. By comparing home prices in counties with high crypto wealth to those with less enthusiasm for digital assets, they discovered that home prices in crypto-wealthy counties grew 43 basis points faster. This translated to a median house price increase of about $2,000 over 12 months, as reported by Bloomberg.

Furthermore, the researchers analyzed the impact of crypto wealth on home prices over the decade leading up to 2023. Bloomberg reports that for every dollar gained in households’ crypto wealth, the median home price increased by 15 cents over the following three months.

The Bloomberg article also highlights an interesting trend observed by the researchers when analyzing investors who withdrew at least $5,000 from their crypto brokerages between 2018 and 2023. These individuals increased their total spending by around $5,754 in the year following a large withdrawal compared to the previous year.

Notably, while mortgage spending remained constant in the six months prior to large withdrawals, it rose significantly after the event. Bloomberg says that for every household that withdrew $5,000 from their crypto exchange account, one in 20 purchased a house for the first time.

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