How The US COVID Stimulus Packages Affect The Entire Crypto Industry

The cryptocurrency space has never failed to amaze us. It’s changing at a rapid pace. New money keeps coming in; some old traders are no longer in the industry, and so on. The cycle keeps going. When everybody outside the industry keeps talking about the “new normal” with how businesses need to adapt to changes, the crypto community is already used with the new normal all the time. Trends come and go, but in overall, the crypto market keeps on growing.

And talking about trends, there’s actually one very interesting thing that was not thinkable before in the crypto space. Have you heard about the US stimulus package for COVID-19? Yes, this has affected the crypto market quite enormously and perhaps will affect it again in the near future. 

Stimulus Packages, Debts, and The Economy

While the United States’ influence all over the world has been gradually decreasing, it’s no doubt still the barometer of international economy. The US Dollar is still the world’s number one reserve currency. The US economy, however, is highly dependent on the printing machine (or should I say the magic button) of the Federal Reserve. 

Yep, the U.S. government keeps getting loans and now the whole debt amount is sitting at a record number. As of July 20th, it’s said that the debt that’s held by the public was worth $20.57 trillion. That’s a very crazy amount. And yes, a portion of it had a lot to do with the pandemic.

You see, the Fed started printing an unexpected amount of money since March, since the COVID-19 pandemic hit most countries outside China. The unemployment rate in the US kept on rising and a lot of businesses were never able to make money anymore due to restrictions here and there.

The Fed also decided to issue a stimulus package where every taxpaying Americans were able to cash out $1,200. The amount of the stimulus package was so huge that it affected every market out there, including the stock market, gold price, and crypto market. Yes, after the liquidity crisis back in early March, everything suddenly went up and it kept going up until late August.

It’s safe to say that this stimulus package had successfully injected liquidity back to the market, and all the big speculators were confident again that the market couldn’t go wrong as long as the Fed is willing to do whatever it takes to save the economy. The crypto market gets some of that liquidity.

The Second Stimulus Will Pump Crypto?

I think, at this point, it’s safe to say that both the republicans and democrats in the U.S. have agreed that there’s a need for a second stimulus package as the American economy is still far away from “recovery”. However, it’s still not yet known when people will able to cash out this second stimulus check.

While both parties had come into agreement, they still have to agree on the details. And yes, analysts are fairly confident the second stimulus would pump crypto. Why? Look at early September and third week of September where everything crashed (gold, crypto, and stock market) just because there were no certainties of the second stimulus package. It’s obvious enough that the whales and traders have been expecting certainties from the U.S. senators before they are convinced that the crypto would pump.

So, while the stimulus package itself might not naturally create a new price floor for Bitcoin and the rest of the crypto market, the speculators already set up their mind about it due to what happened with the first stimulus package. At the end of the day, it has become a self-fulfilling prophecy.

The Future Of Crypto

The future of the crypto market looks like it will be aligned with the stock market for a bit longer. While they were not really correlated prior to March of this year, things sure have changed. Every time the stock market had a flash crash day, the crypto market suffered as well. And both markets would certainly benefit when the U.S. eventually releases the second stimulus package alongside other benefits for the financially struggling due to the ongoing pandemic.