Expensive watches and luxury vehicles might be staples of Wall Street bonus expenditures, but there’s something different this year, according to a Wall Street Journal report. Bankers are also adding cryptocurrencies to the mix.
In a time when inflation is sounding the alarm on discretionary spending, Wall Street is taking a more cautious approach this year. Cryptocurrencies, often seen as an inflation hedge given their disassociation with fiat currency, are also seeing an inflow of bonus capital along with real assets.
“Some, alarmed by the surge in inflation, are seeking shelter in cryptocurrencies,” the WSJ report says. “Others are sniffing out real estate in work-from-home-friendly locales, hunting up pied-à-terres in the city so they can split their time.”
“Three years ago it was awesome to have a nice custom suit. That’s obviously changed,” says an anonymous source referred to by the WSJ as “Arbitrage Andy.” “Because of the way things have played out, priorities have shifted.”
Using Crypto to Hedge Against Uncertainty
Along with inflation, there’s also geopolitical tensions on the minds of investors this year as the major stock market indexes have stumbled to start the first quarter of 2022. Russia’s invasion of Ukraine certainly added that extra dose of market uncertainty that inflation already elevated.
“The way clients are thinking about their bonuses and talking about them is different from the past,” said Liz Miller, president at Summit Place Financial Advisors. “It’s an outcome of a couple of years of the pandemic and ongoing uncertainty in general.”
Purchasing cryptocurrencies isn’t a bad bet given the recent rally over the past month. Even while Russia’s invasion of Ukraine dumped a large bucket of volatility all over the stock market, cryptocurrencies have rebounded in a big way.
Bitcoin’s price is up almost 16%, and ethereum is up almost 20% within the past month. Compare that to the S&P 500, which has gained about 4%, and it’s easy to see why Wall Streeters are putting their bonus money in crypto.
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