Bitcoin’s sensational performance in 2017 could provide Japan and other major cryptocurrency markets with an economic boost in 2018.
In fact, analysts at financial services giant Nomura predict that bitcoin’s 2017 rally could add as much as 0.3 percent to Japanese GDP growth in the new year, according to a Bloomberg report.
“Rises in asset values often result in a rise in consumer spending, too, known as the wealth effect,” wrote Nomura economists Yoshiyuki Simon and Kazuki Miyamoto in a note to clients on Friday. “We estimate the wealth effect from unrealized gains on bitcoin trading by Japanese investors since the start of fiscal year 2017, and estimate a potential boost to consumer spending of 23.2-96.0 billion yen.”
The economists anticipate that although some recent bitcoin investors lost money during the downturn that occurred during the last week of December, many more achieved sizable gains during the fourth-quarter rally.
They expect that this “wealth effect” will lead investors to increase spending, beginning in the first quarter of this year.
“Moreover, the fact that the rise in bitcoin prices was concentrated in 2017 fourth quarter could result in the wealth effect materializing in 2018 first quarter, and if that is the case, we estimate a potential boost to real GDP growth on an annualized quarter over quarter basis of up to about 0.3 percentage points,” Nomura said.
A similar phenomenon could occur in other large cryptocurrency markets, but Japan’s will likely be especially pronounced due to its rapid embrace of bitcoin.
As CCN reported, Japanese investors — many of whom are already familiar with forex trading — have turned the country into one of the largest centers for leveraged cryptocurrency trading.
Japanese bitcoin adoption has been bolstered by a favorable regulatory environment, and analysts estimate that hundreds of thousands of Japanese businesses now accept cryptocurrency payments. Some mainstream companies have even begun to provide employees with the option to receive their salaries in bitcoin.
However, not all analysts are encouraged by bitcoin’s development into a mainstream financial instrument. Last month, Wells Fargo released a report warning that a bitcoin price crash could drag down traditional equities with it, potentially putting an end to the stock market’s historic bull run.
Write to Josiah Wilmoth at josiah.wilmoth(at)ccn.com.
Tokyo image from Shutterstock.
Last modified: May 20, 2020 9:14 PM UTC