How crypto is fueling a real estate boom in the United States?

The myth of crypto riches being spent on Lamborghinis and bling is persistent. However, research reveals that these gains primarily feed into real estate, boosting property markets in areas where crypto is popular.

Crypto Wealth Revolutionizes Consumption Habits in the United States

There is no shortage of success stories on social media about investors who have made a fortune through cryptocurrencies. But how is this financial windfall actually spent? This is the question researchers from several American and British universities have attempted to answer.

By analyzing the transactional data of millions of Americans between 2010 and 2023, they discovered that every dollar of crypto gains generates about 9 cents in additional spending. This wealth effect is twice as significant as that of stocks, but three times less than that of lottery winnings. 

“Our estimates indicate that spending related to cryptocurrencies remains closer to the patterns observed with traditional stock investments,” explains Darren Aiello, co-author of the study.

Real Estate, a Favored Haven for “Crypto-Millionaires”

Contrary to stereotypes, the majority of expenses are not flashy purchases like luxury cars. Crypto-investors actually allocate a significant portion of their gains to acquiring real estate, driving up prices in regions where they heavily adopt cryptos.

The researchers found that in 2017, a peak year for Bitcoin, real estate prices increased by 43 basis points faster in counties with a high concentration of cryptocurrency holders. Over the decade 2013-2023, every dollar earned in crypto translates into a 15-cent increase in the median price of homes in the following 3 months.

Furthermore, by examining withdrawals of over $5000 made on exchanges, the authors noticed a notable increase in real estate spending in the year following. “For every household that withdrew $5000, one in twenty became homeowners for the first time,” notes Jason Kotter, professor of finance.

In conclusion, while the macroeconomic impact of cryptos is still limited in the United States, it is nonetheless real and steadily increasing. The recent arrival of Bitcoin ETFs could further amplify this phenomenon in the coming years, by democratizing access to this asset class.