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