- 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.