Bitcoin prices exploded above $57,000 on Wednesday as US President Joe Biden’s $1.9 trillion coronavirus stimulus bill received final approval from the US House of Representatives, pushing the US dollar index’s value lower.
The House passed the bill after 220 lawmakers voted in favor of it. Meanwhile, all the 211 Republicans voted against the massive fiscal stimulus, worrying about its far-reaching economical and political consequences. Mr. Biden will sign the bill into law on Friday.
Bitcoin logged an intraday high of $57,402, raising expectations that it would extend its rally during the remainder of this week to retest its record high of $58,367 (data from Coinbase). Some analysts also anticipated the benchmark cryptocurrency to reach new milestone levels, given how it fared extremely well against the previous stimulus packages of $2.1 trillion and $900 billion.
That is due to the prospect of a weaker US dollar. Observers believe injecting massive greenback liquidity into the economy reduces its purchasing power in the long-term.
Meanwhile, it leads to higher consumer price inflation, prompting investors to park their cash reserves into safe-haven assets. Bitcoin, with its limited minting cap of 21 million tokens against an unlimited fiat supply, therefore poses as an ideal hedge against dollar devaluation.
Many corporates have already built positions against bearish dollar calls. In February, US carmaker Tesla revealed that it had purchased $1.5 billion worth of Bitcoin. Another Nasdaq firm, MicroStrategy, replaced 70 percent of its cash reserves with more than 91,000 BTC. Payment platform Square and photo-editing app Meiti also invested in Bitcoin to beat a bearish cash outlook.
Despite optimistic catalysts, Bitcoin experienced a massive selloff after crossing above $57,000. The cryptocurrency fell towards $55,000, raising worries about a potential fake breakout.
Blockroots.com founder Josh Rager noted that certain dumping periods would follow after every upside move. Nevertheless, the cryptocurrency expects to continue its rally on higher accumulation sentiment near its local support levels.
“Looking for [the] price to close above $57,500 then make a move to new highs from there,” the independent market analyst said. “We can certainly see some sellers step in here but [with] multiple retests sellers can certainly run out and bulls will continue up.”