New Delhi(CoinChapter): Bitcoin rebounded on Wednesday after major banks in the US started delivering $1,400 stimulus checks as part of Joe Biden’s $1.9 trillion coronavirus relief aid.
The cryptocurrency jumped above $58,000 during the afternoon New York session after trading below $55,000 during most of Asia-Pacific and European trading hours. Traders raised their bids for the cryptocurrency in anticipation that American retail investors would use a portion of their stimulus aid to invest in Bitcoin.
The said sentiment surged as a recent Mizuho survey revealed that the Bitcoin market would attract up to $40 billion worth of capital from stimulus payments.
“We surveyed over 200 individuals who expect to receive the third round of stimulus checks this week,” wrote Dan Dolev, managing director at Mizuho Securities. “The survey reveals that two out of every five [stimulus check] recipients expect to invest some portion of their checks in bitcoin and stocks.”
Mizuho polled 235 people with household income equal or less than $150,000.
The survey led many analysts to predict a bullish outcome for the cryptocurrency. Joe DiPasquale, CEO of BitBull Capital, told CoinDesk that Bitcoin stands to benefit from additional stimulus packages in the US. The cryptocurrency has a limited supply cap of 21 million tokens, unlike the US dollar which has no supply cap. That makes the prospect of holding Bitcoin attractive to investors who fear dollar devaluation due to its oversupplied nature.
Meanwhile, independent market analyst Vince Prince also anticipated a bull run in the Bitcoin market as stimulus checks reach Americans.
How Stimulus Packages Affect Bitcoin
Due to the Covid-19 pandemic, almost every developed and developing economy has faced major losses. That has prompted their central banks to pursue loose monetary policies. Meanwhile, their governments have launched stimulus packages to ensure that citizens and businesses affected by stringent lockdowns can survive the economic blow.
But additional fiat liquidity has also weakened the currency’s purchasing power. For instance, the US dollar index, which puts the greenback against a set of major foreign currencies, plunged almost 12 percent as the US government released two stimulus packages worth more than $3 trillion combined.
Bitcoin, an asset with a limited supply cap of 21 million tokens, has posed as an alternative to unlimited fiat. That explains why many corporations, including Tesla, Square, and MicroStrategy, have added Bitcoin to their balance sheets in addition to cash reserves. Meanwhile, Bitcoin’s adoption as an alternative store-of-value asset has also prompted major financial firms to add crypto-enabled services. They include PayPal, BNY Mellon, MasterCard, etc.