The new US administration is planning to flood the nation with another $3 trillion on top of another stimulus package, an event that may trigger a surge in the price of Bitcoin again.
To cope with the economic consequences of the global COVID-19 pandemic, the United States began implementing stimulus packages in March 2020 to contain the economic impact of the pandemic and boost the country's “rapid economic recovery,” according to the US House of Representatives. In March, the first of these packages was approved for a value of 2,2 trillion dollars; nearly 10% of the country's gross domestic product (GDP).
The state handed out $1.200 checks to thousands of families, and allocated a large part of the approved funds to small businesses, local authorities, the health sector, companies in financial difficulty, airlines, the banking sector, and others. Later, at the end of 2020, the outgoing administration of Donald Trump presented a proposal for a second stimulus package, this time for an amount of $900 billion, which would benefit families with a $600 check.
Now, the Joe Biden administration is considering adding another $3 trillion to these economic measures, according to reports Axios, and extending stimulus checks to families to $2.000 USD, in addition to aid for businesses and other sectors. However, the massive printing of money in the United States, in less than a year, is causing a gigantic boost in inflation levels, which translate into weakening and erosion for the value of the dollar, something that in turn has caused the price of Bitcoin, as a store of value asset, to be unleashed and explode within the markets.
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New highs are coming for Bitcoin
When Congress passed the second $900 billion stimulus package in December 2020, the price of Bitcoin corrected and immediately went up, rising to $23.500 USD by then; a growth of more than $1.200 USD in one day after the news was revealed. Now, with the possible arrival of one of the largest stimulus packages in American history, experts like Alex Melikhov, CEO and founder of Equilibrium, points out that the injection of more liquidity into the markets could significantly boost the price of Bitcoin.
Large companies, such as microstrategy, One River, Stone ridge, Mass Mutual, Square, and others, have begun to invest significant sums of money in Bitcoin. These companies have transformed much of their cash reserves into the cryptocurrency market leader, relying on the appreciation potential of Bitcoin, as a reserve asset of value, even better than gold.
Bitcoin, an alternative to preserve value
Michael saylorSaylor, CEO of MicroStrategy, explained that his decision to invest in Bitcoin came as a response to the growing economic uncertainty within the markets, as a result of the spread of COVID-19 worldwide. In 2020, central banks around the world, such as the US Federal Reserve, began printing exorbitant sums of money to deal with the economic crisis, unleashing a series of negative consequences for society in general, explains Saylor.
The businessman points out that the increasing supply of the dollar has caused its unitary value to depreciate; that is, the value of each dollar unit to decrease. Therefore, after studying several alternatives to protect his cash reserve of more than 500 million dollars, Saylor chose to invest in Bitcoin. To date, MicroStrategy has invested a total of 1,3 billion dollars in Bitcoin in 4 months, which gave it possession of 70.470 BTC, currently valued at $2,4 billion.
Saylor has been busy promoting the potential benefits of investing and holding a store of value in BTC, even challenging billionaire Elon Musk to convert part of his stash into BTC.
Even though the cryptocurrency, as of now, seems to have found the top of the bullish rally it has sustained so far in January, analysts and traders indicate that the approval of a new stimulus package will push Bitcoin to new highs. The injection of large amounts of liquidity into the markets will be a new catalyst for the price of Bitcoin and cryptocurrencies.
Europe also imposes new economic measures
The president of the European Central Bank, Christine Lagarde, announced, on December 10, 2020, new economic measures, which will lead the bank to print other 500.000 millones de euros to “adjust” its crisis recovery policies, which have been affected by new outbreaks of the virus. According to the announcement, the new measures, described by many as “bold”, are intended to prevent the current liquidity crisis from becoming a solvency crisis, which ends up destroying the productive fabric of the region, as has happened in the past. he pointed the Bank for International Settlements (BIS) in its September quarterly report.
However, this new batch of fiat money brings Europe's Pandemic Emergency Purchase Programme (PEPP), which was implemented in March this year, to a total of 1,85 billion eurosThis asset purchase program has been the easy way out taken by the world's major central banks to sustain their debts, thanks to the fact that they have the power to create fiat money without complications. With these measures, the mountain of bank debt is growing by leaps and bounds, placing us as a society at a new economic crossroads.
Throughout human history, the political and economic measures taken by our leaders in the past led us to great crises, and it seems that this time the reality will be no different. Given this situation, Bitcoin continues to present itself as a safe haven asset, with the ability to even generate generational wealth, as pointed out Gary Leland, saying: “I once said I would slowly start selling my Bitcoin at 100K, but I have decided to never sell. When the time is right, I will borrow and pass it on to my children and grandchildren. An opportunity to build generational wealth.”
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