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What the US and Other Global Stimulus Means For BTC and Crypto Markets

If you missed out on the previous investment, there is a chance to benefit from the new stimulus package. The stimulus by the present US administration will be positive for the growth of Bitcoin and other cryptocurrencies.

Introduction

March 11th was a notable day in the U.S after the House of Representatives embraced President Joe Biden's plan. The plan contributes a relief package ($1.9trillion) following the COVID-19 pandemic. This package was approved by both parties of Congress. What more, the stimulus package is set to contribute to the bullish run of the top cryptocurrency, Bitcoin.


Insight on the Stimulus Package

A stimulus package is a form of incentive given by any nation's federal government following a financial crisis. It is usually issued out to help the economy from crumbling. The essence of a stimulus package is to increase the rate of employment and decrease recession.

It isn't easy to amend recession individually, but with government intervention, the impact of the recession could be eased. For instance, if there is a stimulus package, the economy will be boosted. How so? There will be decreased spending privately and an increase in demand. Therefore, the output gap of the economy will be “stimulated.”


Forms of Stimulus

There are two primary forms of stimulus: monetary stimulus, and Fiscal stimulus,

  • Monetary Stimulus: This is the process by which the government shortens the interest rate of its citizens to boost the economy. By cutting down the interest rates, people may have the intention to borrow. Also, borrowing costs will be reduced. As people continue to borrow, there will be more money in circulation, fewer savings, and more reasons to spend. The country's export may be boosted when interest rates are also reduced because exchange rates are weakened. An increase in exportation will increase the country's economic yield.
  • Fiscal Stimulus: This is how the government reduces the tax rate of the citizens or increases spending rates to boost the economy. When tax rates are shortened, there is more income to spend on citizens. When there is more income, people have enough to spend. This will increase production and the growth of the economic system. Similarly, when the government's spending increases, there is more money in the economy, and unemployment is decreased. Therefore, the impact of the recession will be overthrown. A stimulus package falls in this category, as approved by the government.
  • Bonus: Quantitative Easing: This is a form of monetary stimulus where the central bank purchases many financial services from other traditional banks. This purchase increases the yield of all financial institutions patronized. This type of stimulus is usually used when the traditional monetary incentive is ineffective.

Currently, the US has employed both Fiscal and Monetary stimulus. This can be seen in the low-interest rates, quantitative easing, and the two stimulus packages passed.


Effect of the US Stimulus Package on Cryptocurrency

In just under a year, we have witnessed two stimulus packages by the United States. Following the Coronavirus pandemic, the US signed a stimulus package in March 2020. The then-president, Donald Trump, approved that tax-paying citizens collect some amount of money — $1200. This arguably brought about an increase in cryptocurrency interest. Interestingly, anyone who invests this sum in Bitcoin would have at least $10,000 worth of BTC.

Now, with cryptocurrency already in its full swing, the recent stimulus package by Joe Biden will only add fuel to the rally. According to reports, the package will see to it that tax-payers get $1400. Judging by Bitcoin's rapid rise, we anticipate a similar outcome to last year's event.

The crypto market has gained strong ground with the equity market over the last two weeks due to the speculation of the additional 1.4 trillion being added to the economy. Cryptocurrencies seem to be standing strong on the news.


What US Stimulus Means to the Individual

We discussed earlier the last stimulus package distributed by the previous US administration. The $1200 stimulus contributed to a bullish run in the crypto market as Bitcoin outperformed nearly all markets. On the 15th of April, the top cryptocurrency was trading at $6848. Now, if you had invested all $1200 gotten from the government, you would have gained more than $10000 worth of BTC. This corresponds to a whopping increase of more than 700%.

If you missed out on the previous investment, there is a chance to benefit from the new stimulus package. However, the price of Bitcoin will have to be at approximately $476,000 for a similar percentage increase to be achieved. As history often repeats itself we are optimistic that another stimulus package, this time even bigger, will lead to another bullish run. While 500,000 is a bit far-fetched there is still plenty of growth for BTC.

Analysts have predicted that Bitcoin may get to the $100000 mark by the end of 2021. JP Morgan's Nikolaos Panigirtzoglou also backed this prediction, saying that the top asset will overtake gold as a better store of value. Plan B recently updated his stock to flow model with a new BTC average price target of 288,000.


Conclusion

Bitcoin recently reclaimed its $1trillion market cap and is currently in a consolidation period. The upcoming stimulus package, the economy, and also the crypto market will be one to monitor as the cryptos bullish cycle continues. Overall, the stimulus by the present US administration will be positive for the growth of Bitcoin and other cryptocurrencies at large.

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