Cryptocurrency wealth creates a new generation of luxury consumers in the US, says Jefferies | Currency News | Financial and business news

A young man in a suit walks past a luxury boutique on 5th Avenue in Midtown Manhattan.
A young man in a suit walks past a luxury boutique on 5th Avenue in Midtown Manhattan.

  • An increase in cryptocurrencies is causing young people to spend their profits on luxury goods, Jefferies said.
  • People under 35 collect artwork, luxury brands and more with their crypto winnings.
  • The cryptocurrency market briefly grew to over $ 3 trillion during 2021.

The jump in cryptocurrency prices helps to cultivate a new harvest of young, American buyers of luxury goods, with their consumption of NFT works of art and expensive clothing set to further drive sales in the luxury market beyond the pre-pandemic level, according to a report by Jefferies .

Chinese consumers remain the dominant force in global luxury consumption. But a “surprise package” since the first quarter has been strong growth in the United States year-on-year, the investment bank said in a research note on Wednesday. The memo outlined results from visits to 48 stores in New York and Florida, where high-end brands including Louis Vuitton and Gucci, whose parent company is Kering.

“In addition to the natural impact of the so-called ‘accumulated demand’ … we mark the significant increase in asset values ​​(from stock market to real estate to contemporary art) and above all the significant impact of cryptocurrency wealth, which has increased total cash transactions again, “wrote equity analysts Flavio Cereda and Kathryn Parker.

They said that conversations with store managers and assistants seem to mark a significant role played by people under the age of 35, who collect cryptocurrency profits to buy art – including in the form of non-fungible tokens – expensive jewelry, clothing and accessories.

“Our conversations would indicate as much as 20% -25% of [last 12-month] Sales may have been generated by this phenomenon, “said analysts.

The crypto market in 2021 swelled beyond a valuation of $ 3 trillion for the first time, mainly as several institutional and retail investors have pushed money into digital assets ranging from coins to NFT art. The price of Bitcoin this year has risen by 62% until mid-Wednesday, with the most traded cryptocurrency above $ 47,200. But with the crypto market exposed to sharp price fluctuations, its market value has dropped to $ 2.3 trillion.

Channel checks conducted by Jefferies coincided with both the Art Basel International Art Fair in Miami and a series of important crypto-trading events – “which meant almost the perfect pool of interlocutors,” it said.

The company said U.S. luxury spending in fiscal year 2021 has returned to levels logged in 2019 before the coronavirus pandemic. It said in fiscal year 2023 that such spending could be 45% more than in the same period in 2019.

“This is highly dependent on the resilience of the underlying assets, which allows for monetization and is therefore implicitly volatile, but is at least not subject to the risk of growing government pressure, as is the case in China,” it said.

Jefferies advised investors to be buyers of shares in LVMH, Kering, retailer Mytheresa and Watches of Switzerland.

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