In the weekend, the US Senate passed the president’s $1.9 trillion stimulus package to cushion the effects of the COVID-19 pandemic. Such a presentation of checks to many US citizens could boost the upward momentum of Bitcoin. Last weekend, President Biden sent the bill to the Senate for passage. Many keen observers understand that the package will devalue the US dollar but boost Bitcoin’s price. This position can be confirmed from the rise in Bitcoin’s price after the Senate endorsed the distribution of the COVID-19 stimulus package.
This package stands out as one of the US government’s largest interventions since the 2nd World War. Although it was not up to the $2.2 trillion stimulus package in March last year, it is far higher than the $787 billion intervention that the government used to bring back financial institutions to life During the 2008 global economic crisis.
In What Direction Will Bitcoin Move?
Some analysts believe that many beneficiaries of the COVID-19 stimulus package will invest part of the money in Bitcoin or any of the cryptocurrencies. The analysts hinge their assertion on Bitcoin’s status as a hedge against inflation. A fall in the price of USD is a boost to Bitcoin because it will increase the asset’s investment. Bitcoin is now referred to as digital gold, mainly because the government can’t increase its supply by printing more Bitcoin.
The relationship between Bitcoin and the US dollar can be seen when Bitcoin crossed the $50,000 mark, reaching $53,000 with the potential of rising higher. Sincerely, it’s unclear if Bitcoin’s recent rise in is directly related to the US economic stimulus plan. Likewise, the debate about the relationship between the direction of Bitcoin’s price and the country’s macroeconomic direction is still hot.
According to Ingo Fiedler of Blockchain Research Laboratory, there is indeed a short-term relationship between the two. The reason is that the Bitcoin price changed significantly as soon as the stimulus package was announced. Meanwhile, Bitcoin has been rising steadily, especially in the wave of the COVID-19 pandemic. Also, more people are likely to invest in the asset as time goes on.
More US Dollar in Circulation will Increase the Price of Other Assets
As the supply of the US dollar rises, the price of assets will keep increasing. The supply of the US dollar will affect all asset types, ranging from securities, art, cryptocurrencies, and more. As you might expect, the increase in the supply of the US dollar will devalue the currency.
Analysts agree that many investors will seek refuge in Bitcoin to cushion the inflationary effects of the heavy supply of US dollar in circulation. Even more institutional investors will likely invest in Bitcoin in response to the stimulus package.
It is worthy of note that not only the US institutional investors are reacting to the stimulus package. As soon as the bill was passed, Meitu, a Chinese app producer, and Ker ASA from Norway have included Bitcoin in their balance sheets. Apart from institutional investors, some Twitter accounts have been opened to sensitize investors on the profitability of investing the package in Bitcoin.
For example, the Twitter handle, @BitcoinStimulus, Is asking investors to compare today’s Bitcoin price with the previous stimulus package. Last year’s $1,200 April stimulus is not worth $9,000, more than 600% gain for the beneficiaries who invested the Bitcoin money.