Crypto players have had a rough 2022, but Goldman Sachs economists believe that the decline in crypto may not be enough to bring back laborers who realize they are an NGMI (unlikely to succeed).
The Goldman Sachs report specifically focused on the engagement of young men in the crypto world, as this is the demographic group most likely to invest, trade or use cryptocurrencies. The premise is that if the appreciation of crypto assets attracts some young people to quit, then the collapse of crypto assets should also cause these men to start looking for jobs.
But they found that employment levels for young men have returned to pre-pandemic levels, suggesting the cryptocurrency boom has so far played a “limited role” in “holding back” jobs.
“As a result, the recent fall in cryptocurrency prices will provide only a limited boost to future labor supply,” Goldman analysts wrote.
The same team, led by Goldman Sachs chief economist Jan Hatzius, wrote a report last November on lifestyle trends that could lead to long-term changes in employment. For prime-age workers, the desire to “live without a job” could affect labor force participation rates, the report said.
“We see some risk that some workers will opt out of the labor market for as long as they can afford to do so,” Goldman Sachs noted at the time.
But the prices of bitcoin and ether have more than halved since then. The collapse of the well-known stablecoin UST highlights the volatility of the crypto market.
Hatzus and his team also believe that the U.S. economy should be able to easily avoid the wealth effect of falling cryptocurrency prices.
“Any impact from the recent fall in cryptocurrency prices is likely to be modest,” Goldman concluded.
Even as the total cryptocurrency market capitalization has fallen by more than $1 trillion from last year’s peak, Goldman Sachs estimates that only about a third of the global market appears to be owned by U.S. households.
By contrast, the bank estimates that stocks make up a much larger percentage of household net worth, around 33%. The stock market’s performance so far this year is a bigger risk to household spending as recession risks loom, the report showed.