Sebastian Sinclair

Researchers from the US National Bureau of Economic Research have unveiled a direct link between rising crypto wealth and the increase in house prices at the county level.



Transaction-level data across millions of households was used to identify how fluctuations in individual crypto wealth have impacted household consumption, equity investment and local real estate markets.



The July <a href="https://www.nber.org/system/files/working_papers/w31445/w31445.pdf" target="_blank" rel="noreferrer noopener">paper</a>, titled &#8220;The Effects of Cryptocurrency Wealth on Household Consumption and Investment,&#8221; concluded crypto has “substantial spillover effects” on the real economy.



In the wake of 2017&#8217;s crypto surge, counties with a high prevalence of crypto wealth witnessed their house prices increase approximately 46 basis points faster compared to those without.



This represents roughly 12% of the standard deviation in the house price growth throughout 2018, per the study. The year 2017 saw a significant increase in bitcoin’s price, from $950 to $14,000, resulting in significant crypto wealth accumulation for those who had invested earlier in the asset’s life cycle.



When evaluated in terms of dollars, data showed house prices in counties with high crypto wealth were about $1,878 greater in the nine months succeeding the 2017 surge. This amounts to roughly a 1% uptick in prices when compared to the average county house price.



The research team also found the marginal propensity to consume (MPC) from unrealized crypto gains was more than double that of unrealized equity gains but less so than the MPC from cash flow shocks.



“While crypto may have limited spillover effects onto other financial assets, our results show that crypto investment does affect real assets,” the researchers said. “As a result, the distribution of crypto wealth has meaningful implications for the real economy.”



An increase in bitcoin&#8217;s value triggered substantial withdrawals from crypto exchanges, which were frequently directed toward real estate investments, the researchers noted.



Crypto investors continue to seek out novel ways to purchase real estate. Earlier this year, startup <a href="https://blockworks.co/news/real-estate-investors-buy-nft-home">Homebase told Blockworks</a> it had finalized the tokenized sale of its first single-family rental property — valued at $246,800.



Also, this year, property technology company <a href="https://blockworks.co/news/roofstock-sells-property-via-nft">Roofstock</a> became the first to facilitate the transaction of a single-family rental home via an NFT marketplace.



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Crypto wealth boosts house prices, NBER study finds

On this episode of &#8220;<a href="https://youtu.be/LuB2RcrXFHE" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Blockworks Co-founder Mike Ippolito is joined by returning guest Eric Basmajian, founder of EPB Macro Research. After correctly identifying signs of decelerating growth months ahead of most, Eric comes back to the podcast to share how he forecast the economic slowdown. 



As the yield curve inverts, GDP numbers begin downward revisions and investors deal with soaring prices across the whole commodity complex. Eric lays out the major warning signs that can help identify cyclical changes in the economy. 



Referencing Edward E. Leamer&#8217;s paper &#8220;Housing IS the Business Cycle,” Eric also gives listeners a crash course on the connection between housing and economic growth. To hear more, tune in!



They also cover:



<ul class="wp-block-list"><li>solutions to the growth problem</li><li>risk assets</li><li>and so much more</li></ul>



Watch the full episode below! 👇



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&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts. At the end of the week, he is joined by a co-host where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/on-the-margin/id1558223079" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://open.spotify.com/show/2yFL2nSsQucf1rzdEKbFZY" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



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