What the $1.9T Stimulus Means for Crypto Markets

Biden’s stimulus package is welcome news and the outlook for bitcoin and crypto markets looks as promising as ever.

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key takeaways

  • Coronavirus relief package could represent major milestone for bitcoin
  • Given that crypto investment and bitcoin price rose considerably in the face of the last stimulus package, a repeat of that trend is possible

Yesterday, President Joe Biden’s $1.9 trillion coronavirus relief package received its final backing from the House of Representatives. This congressional approval for a massive fiscal stimulus could represent a major milestone for bitcoin. 

We have already seen two rounds of federal coronavirus relief and stimulus cheques in the US. The first, signed off in March 2020 by Donald Trump, saw tax-paying Americans receive $1,200 and sparked a significant surge in cryptocurrency investment. Those who invested the entirety of this cheque into bitcoin in April last year would now be sitting on over $10,000 BTC. 

Repeating a trend

Biden’s package will see tax-paying Americans receive up to $1,400. Given the wave of crypto investment and the price of bitcoin rose considerably in the face of the last stimulus package, we expect to see a repeat of that trend this time around.

Over the past two weeks, the crypto market has been highly correlated to the equity market with rising yields and rotational out of growth stocks into value stocks. However, the crypto market has held up relatively well following Federal Reserve chairman Jerome Powell’s comments last Thursday which put high growth stocks into a downward spiral.

Speaking at the Wall Street Journal jobs summit, Powell gave little indication that the Fed has any dovish plans or is willing to intervene in the recent government bond sell-off. In the US, futures for the benchmark S&P 500 stock index dropped by 0.44%; Dow Jones futures by 0.46% and Nasdaq 100 by 0.49%. Asian and European stocks also fell sharply.

Regaining its standing

The crypto markets decoupled with the equity market over the weekend and into the start of this week; and with the funding rates reset – meaning there is not much leverage in the market – the crypto market was ready for a leg higher.

The recent equities rally has helped digital assets regain its standing. Bitcoin is currently sitting at around $57,000 and Ethereum at $1,850. Many of the public companies with bitcoin exposure were up on Tuesday – for example, Tesla was up by 20%, and Silvergate, Marathon Digital Holdings, Overstock, Microstrategy and Nvidia were all up too.

With bitcoin reclaiming the $1 trillion market cap, we expect to see a leg higher once it achieves stability and passes the $58,000 resistance. With another $2 trillion infrastructure bill on the horizon, the environment continues to be bullish for bitcoin and the wider markets. 

In short, Biden’s stimulus package is welcome news and the outlook for bitcoin and crypto markets looks as promising as ever.

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Research

With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

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