Planned Corona aid package from Joe Biden could further fuel Bitcoin
Aid to the economy could drive inflation and give Bitcoin a leg up, as it were.
The administration of Joe Biden, which will take office in just a few days, plans to give the American economy a helping hand with massive new aid payments, which could give Bitcoin’s (BTC) current record run another big boost.
As Texas-based news portal Axios reported on Thursday, Joe Biden has already asked Congress to release one-off payments of US$2,000 to every American citizen to boost the economy, which has been Bitcoin Circuit battered by the Corona crisis. In addition, the incoming president has proposed a $3 trillion aid package. US dollar aid package to boost the economy through tax cuts and infrastructure investment.
On Friday, Biden again made the case for direct aid payments following yesterday’s release of December unemployment figures showing another 140,000 job losses.
Accordingly, Biden called for:
„Economic analysis confirms that in situations like the current crisis, especially with interest rates as low as they currently are, it is all the more important to intervene immediately and help the economy, even if it means taking on debt.“
If 2020 is taken as a reference point, then the new aid payments could again act as a catalyst for Bitcoin, as the more money that flows into the market, the higher the price of the market-leading cryptocurrency will be driven.
Donald Trump had passed the largest aid package in US history last March, which amounted to 2 trillion US dollars
US dollars. In December, he had also approved a US$900 billion aid package that includes one-time payments of US$600.
Despite the good intentions, however, the aid packages and aid payments are controversial because they put money into circulation without generating any value in return. This could cause rising inflation, which would devalue the US dollar and thus also assets. The aggressive monetary policy of the US central bank, which is supposed to prevent a liquidity crisis by „printing“ more and more money, could unintentionally reinforce this effect.
US central bank debt.
Although these measures are beneficial for risky financial products such as equities, Bitcoin could also benefit, as the cryptocurrency is increasingly making a name for itself as a hedge against inflation.
Not only is the cryptocurrency’s strong performance in the 11 years since its inception evidence that it is unaffected by inflation, but the growing interest of institutional investors can also be seen as a finger pointing in support of this thesis.
The narrative around Bitcoin as digital gold is accordingly a driving force behind the increased demand by institutions. This has allowed Bitcoin to gain 300% in 2020 despite (or perhaps because of) the crisis. In the last three weeks alone, the cryptocurrency’s price has doubled. Should the US dollar lose value due to the new aid measures, Bitcoin’s soaring price could be further fuelled.
Even the influential investment bank JPMorgan Chase has now confirmed that Bitcoin is grabbing market share from gold. On Friday, one unit of the cryptocurrency was equivalent to more than 22 ounces of gold, which is a new record.