A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
The soaring price of Bitcoin has created an additional 70,000 new crypto billionaires over the past year, increasing potential spending into the economy by hundreds of billions of dollars, according to a new study.
According to Henry & Partners and New World Wealth, an estimated 241,700 individuals currently hold more than $1 million in cryptocurrencies, an increase of 40% from last year. According to the report, there are 450 crypto centimillionaires, or holders of more than $100 million in cryptocurrencies, and 36 crypto billionaires.
Bitcoin’s price has more than doubled in the past year as the dollar weakened and concerns about budget deficits and spending grew. More relaxed regulations in the United States and widespread adoption by investors and traditional financial services companies are also driving demand. On Monday, Bitcoin broke above $125,000 for the first time before settling around $122,000.
The global cryptocurrency market capitalization has soared to more than $4.3 trillion, with paper assets increasing by $2 trillion over the past three years. While still small compared to the recent stock market rally – Nvidia itself is worth more than $4 trillion – the crypto boom has created significant wealth for millennials and other young investors who were early investors in crypto.
“Bitcoin is becoming the basis of a parallel financial system, becoming the base currency for accumulating wealth rather than simply an investment to speculate on the rise in fiat currency prices,” said Philippe Bauman, founder of crypto trading firm Z22 Technologies.
A new class of crypto-rich individuals has only recently emerged, and reliable research on their spending and investment habits remains lacking. But a new paper by a group of economists that analyzed cryptocurrency wallets sheds light on some common characteristics and overall spending.
The study, conducted by professors Darren Aiello, Mark Johnson, and Jason Cotter from Brigham Young University, Scott Baker from Northwestern University, Tetiana Baruch from Emory University, and Marco Di Maggio from Imperial College London, surveyed crypto investors based on their transfers to and from crypto exchanges.
They found that crypto investors spent about 9.7 cents of every dollar on additional crypto assets. This ratio, known as the marginal propensity to spend, was more than twice the level typically seen in stock markets and rising house prices. Cryptocurrency investors tend to be younger, so they tend to spend more of their wealth than older investors.
The report’s authors estimate that the additional wealth generated by cryptocurrency profits accounted for $145 billion in additional spending in 2024, or about 0.7% of total U.S. consumption.
However, the decline in virtual currencies has the opposite effect.
“Although the large increase in crypto assets over the past decade likely contributed positively to economic growth through consumption spillovers, this symmetry suggests that a crypto crash could exert significant negative pressure on the economy as investors reduce consumer spending,” the study said.
The authors note that crypto investors tend to fall into two broad categories: casual crypto investors, who invest a relatively small percentage of their investments in cryptocurrencies, and “all-in” investors, who allocate 100% of their investments to cryptocurrencies. More diversified crypto investors tend to spend more of their profits. “All-in” investors rarely change their spending because they have “strong beliefs” about the future of cryptocurrencies and rarely sell.
When it comes to spending, crypto-rich people who splurge on Lamborghinis and Rolexes seem to be the exception rather than the rule. According to the survey, most of the spending is on restaurants, entertainment, and miscellaneous goods.
Previous research by the group found that real estate is popular among crypto-rich individuals. This study looked at home prices in counties with high and low crypto populations. The study found that when Bitcoin spiked, home prices rose 0.46% faster in crypto-heavy counties.
The study found that “an increase in crypto assets causes a significant increase in house prices.”
But Bitcoin’s current boom may not lead to a sudden spike in spending. Tad Smith, former CEO of Sotheby’s and now a partner at 50T Funds, a growth equity investment firm focused on digital assets, said many wealthy crypto investors continue to hold Bitcoin and other tokens in hopes of further price appreciation.
“They want to give it their all because this is the moment they’ve been waiting for,” Smith said. “For them, now is not the time to sell.”
Smith said that while some long-time mega-holders of Bitcoin, known as “whales,” may be liquidating a small portion of their holdings from time to time in the current price rally, the vast majority of avid crypto investors are pouring even more money into the asset class.
Smith said that in the long run, as crypto investors grow older and start families, they will likely spend more on real estate than on fancy cars or watches.
“The last big cycle, they were young,” Smith said. “Many of them now have children and have to think about growing their families, so their lifestyle choices are different.”
Spending among crypto-rich individuals is also likely to accelerate as crypto-backed lending products become more accepted. Zach Prince, head of Galaxy Digital’s new trading and finance platform GalaxyOne, said buying a home is difficult for many wealthy crypto investors because of crypto collateral.
“Currently, if you want to borrow against cryptocurrencies, your options are relatively limited,” he said. “I’ve heard countless horror stories from people who have millions of dollars in crypto and want to buy a home, but can’t get a mortgage approved by a traditional bank lender.”
But that trend may be changing. Federal Housing Finance Agency Commissioner Bill Pruitt has directed Fannie Mae and Freddie Mac to take crypto assets into account in their mortgage underwriting guidelines.
Prince said that if financiers allow crypto-rich people to borrow more, their spending will increase because they won’t have to sell their positions for liquidity.
“The ‘buy, rent and die’ strategy has been around for a long time,” he said. “The problem is that crypto investors don’t have access to borrowing.”
