By US household wealth has rippled past the $100 trillion for the first time in history and this is due to the rise in the value of stocks and property values. Analysts, being the studious folk they are have warned us that this unsustainable growth in household wealth could very well be leading to a market crash and this might actually see millennials flocking to Bitcoin and other cryptocurrencies.
The fact that US household wealth reached $100 trillion back in September could be seen as a positive development but if one had to compare the stagnation in US household income, it becomes alarmingly evident that this unprecedented rapid growth of US household wealth will not be sustainable in the long run.
Russ Mould of AJ Bell Investment had this to say:
“Household net worth cannot sustainably grow this much faster than incomes. Assets have been bid up and at some stage, there has to be chance that they correct, just as happened in 2000 and 2007.”
Another Bubble-Like Environment?
Mould also noted that the US stock market is currently experiencing one the strongest bull markets in history along with the real estate market which continues to rise in value and it’s these two factors that have lead to a spike in household wealth. He went on to state that if this household wealth cannot be backed by stable income, then the market is due for an inevitable and major correction.
“The difference is likely to be accounted for by the surge in the value of financial and other assets — equities, bonds, property and frankly everything from vintage cars to art to wine to baseball cards. And this is one warning that at some stage another collapse in financial markets will sweep around the globe,” Mould said.
Another world-renowned economist and professor at Stern School by the name of Nouriel Roubini also recently noted that there could be an impending financial crisis in the US by as early as 2020 stating that the market has been exhibiting bubble-like behaviours during this last year.
If one takes global debt which is currently sitting $250 trillion, the exponential income growth rate and US household wealth it’s clear that the US market is due for a correction said Mould. Whether this is to be a minor correction or another financial crisis remains to be seen.
How Viable Could Bitcoin Be As An Investment:
Bitcoin or BTC is often seen as a store of value with no connection to the mainstream financial market. It is a digital currency that moves freely and independently of traditional assets and commodities and thus Bitcoin is able to operate as a reliable store of value during times of market volatility and uncertainty.
It must be noted that there is no connection between BTC (and other cryptocurrencies) and the broader financial market and a decline of the global market does not guarantee a bullish market for crypto, said Matt Hougan, vice president of research and development at Bitwise Asset Management in an interview to Bloomberg.
“Non-correlation is not the same as inverse correlation so there’s no guarantee that when the market goes down crypto will go up. Over the long term, we think the fundamental drivers of crypto are different from the fundamental driver of equities and other assets, and we would expect the low correlation to persist,” Hougan said.
However, it must be noted that there is an increasing demand for Bitcoin stemming from millennials and surveys have found that over a third of millennials are planning to invest in digital currencies in the next few years with 80% of American millennials already aware of Bitcoin and crypto, it is highly likely that if the US were to suffer another financial as analysts are predicting, Bitcoin could become the saving grace as a viable store of value.
Are you interested in investing in Bitcoin in the next few years? Would a looming financial crisis push you to invest sooner? Let us know by commenting below.
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