House Democrats passed the massive bill in late February with no Republican support, despite the defection of two of their own members. Many beneficiaries used their December 2020 stimulus money (up to $60 per eligible adult and child) to purchase Bitcoin, and we may see a repeat of the trend in 2021, especially with Bitcoin reaching new highs of over $58,000 and luring even more retail investors to hop on the train.
Why Are Americans Using Their Stimulus Checks to Buy Cryptocurrencies?
As the Covid-19 pandemic ravaged the US economy, lawmakers turned to direct payments to citizens (with income limits) as a cushion against the carnage. In March 2020, the US Congress approved $1,200 payments with a further $600 approved at the end of that year.
Fluxuations in cryptocurrency prices that coincided with the dispersal of these checks and investor chatter on Reddit suggest recipients directed portions of those payments were toward the crypto market, spurred on by a weakening dollar and Bitcoin’s meteoric 2020 price rally. $1.9 trillion stimulus check is in the pipeline in a move that could see each American consumer get $1,400 each. This forms part of President Joe Biden’s American Rescue Plan to cushion the harsh effects of the Covid-19 pandemic.
Historically, stimulus checks in America have been used by consumers to purchase Bitcoin and other crypto-currencies. In 2020, Americans received stimulus checks of $1,200 and $600 respectively with the latter coming in on December 30, 2020.
Furthermore, the fear of missing out on Bitcoin’s giant leaps was a major psychological factor drawing US investors to add a digital element to their portfolios.
The timing of the stimulus checks also contributed to making Bitcoin an attractive asset. For example, a significant number of $600 stimulus checks hit recipients’ bank accounts on December 30, 2020, just prior to the long New Year’s weekend, when stock markets were closed. Those who went digital instead of waiting a few days for the opening bell to make an investment seem to have made wise decisions.
From trading around $25,000 in December 2020, Bitcoin’s price has steadily climbed throughout the beginning of 2021 to reach an all-time high of $58,332 in late February before experiencing a price correction and dipping back down around $48,000.
On the Flipside
Mapping the Effect of the Proposed $1,400 Stimulus Check
Another $1,400 in stimulus checks could presage another Bitcoin price rally, potentially pushing it past $60,000 (a new high) as seasoned investors and newbies rush for a piece of the crypto action.
“The Biden stimulus may add an extra jolt to bitcoin’s price,” says Jehan Chu, managing partner at Hong Kong-based crypto investment firm Kenetic Capital. According to survey data from financial firm Self Inc., some $1.09 billion in stimulus money has already been invested in digital currencies, and Coinbase noted that after the $1,200 checks landed, it saw a 200% increase in the number of $1,200 deposits.
With Bitcoin on the rise, and buoyed by institutional investors like Tesla (NASDAQ:TSLA) and BNY Mellon (NYSE:BK), more Americans will no doubt have crypto on their minds as the $1,400 stimulus checks start rolling in.
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Source: Cryptocurrency - investing.com
