The bill represents one of the largest government interventions in the American economy since World War II. It didn’t quite hit the record $ 2.2 trillion from the COVID-19 pandemic in spring 2020, but it is still more than the $ 787 billion support package released following the 2008 financial crisis.
How will Bitcoin react to the release of new dollars into the economy?
The US Senate has adopted President Joe Biden’s ambitious «save America» plan – a $ 1.9 trillion stimulus package .
Recall that the stimulus package for the economy also involves direct payments to the citizens of the country. This has already happened before: in particular, in April 2020, due to the spread of the coronavirus and the imposed quarantine, some US residents received $ 1,200 each. If this amount were invested in the first cryptocurrency on April 15, 2020, today it would turn into $ 9,843. This is equivalent to 720 percent growth.
For clarity, we present a graph of the Bitcoin exchange rate from March 1, 2020. It includes a large-scale collapse of markets on March 12 and further growth of the asset.
In connection with the behavior of Bitcoin after previous payments, analysts expect a similar wave in the market and after new checks. Here are the points of view of various experts regarding this situation.
What will happen to Bitcoin due to US actions?
According to the analyst of Quantum Economics Jason Dean, at least part of the «free money» provided to the US population will get into the crypto market. And this, in general, is good for the continuation of the upward trend. Here is his quote, in which he shares his attitude to what is happening.
There is a high likelihood that at least some of this money will end up in the mainstream cryptocurrency, or perhaps even altcoins.
That is, Dean believes that the scenario of using the funds received by citizens to purchase Bitcoin and other cryptocurrencies is quite possible. We agree with this, since blockchain assets are now very popular due to investments from large companies such as MicroStrategy and Tesla. In addition, BTC itself has shown excellent results in recent times. The cryptocurrency has 40.9 percent growth in a month and 590.6 percent in a year. Obviously, many US residents have at least heard about this asset and will want to transfer some of the free money into an asset with a limited maximum supply and a fixed issue, that is, an issue.
One of the main reasons for this is Bitcoin’s attractiveness as a defense against inflation. The decline in the value of the US dollar has had a positive effect on BTC as a digital gold – an asset that cannot be depreciated by the government. Since the Senate passed the stimulus package on Saturday, Bitcoin’s price has risen again, including surpassing the $ 55,000 threshold .
True, it is not yet clear how strong the connection between macroeconomic events and the value of the main cryptocurrency is. According to the co-founder of Blockchain Research Lab Ingo Fiedler, the short-term jump in the price of Bitcoin is a speculative reaction to the news about the adoption of the economic stimulus package. Here is his line, quoted by Decrypt.
As more dollars enter the market, asset prices are likely to rise further. This will affect all types of assets, including real estate, securities, art, as well as cryptocurrencies. In fact, this is a devaluation of the US dollar in relation to all these investments.
This means that the expert agrees with the prospect of growth in the cryptocurrency market after payments are made to US citizens. This is also explained by the fact that the mass printing of the dollar will devalue it to some extent, so the coins should cost more in dollar terms at least because of this.
By issuing new dollars, the US government is desperately trying to patch holes in the economy
The CEO of CF Benchmarks cryptocurrency platform Su Chung is confident that Biden’s decision will attract more large investors to the crypto market.
This high inflationary backdrop is likely to push many long-term investors. This is especially about institutions such as pension and insurance funds, which will invest in assets that are not subject to inflationary pressures – for example, in cryptocurrencies.
Indeed, large investments in Bitcoin seem to be going global. Just two days after the stimulus package was passed, Chinese app maker Meitu and Norwegian multinational Aker ASA have converted part of their balance sheet to BTC, joining US firms like MicroStrategy, Square and Tesla.
However, the dollar against other traditional currencies amid news of a new stimulus package has grown by a couple of percent in just a few days. According to the head of the US Federal Reserve System Janet Yellen, the emission of currency will only strengthen the dollar, and will not lead to its further depreciation. Biden’s bill has yet to be approved by the House of Representatives. But since it belongs to the Democrats, it is expected that the document will be adopted without much controversy.
We believe that paying out funds to US residents will really have a good impact on the cryptocurrency market. Still, over the year of the pandemic, people began to visit bars and spend time with each other noticeably less often, which freed them up some money. Some of them have already gone to invest in various assets, which, among other things, confirms the growth of markets over these months. So it would be logical to channel the flow of new money into a new asset class that shows excellent results and does not depend on the actions of the government.
