On January 14, president-elect Joe Biden announced a proposed $1.9 trillion rescue package in an effort to stimulate the United States economy and combat the COVID-19 fiscal crisis. Mr. Biden’s pandemic response will be financed completely through increased federal borrowing. The president-elect states, “The very health of our nation is at stake… [and it] does not come cheaply, but failure to do so will cost us dearly.”
Although many Americans are optimistic that the proposed rescue package will help relieve the economic downturn and aid the country towards reopening, many questions whether the short-term benefits outweigh the long-term consequences. As quoted above, Biden believes that a “failure to do so [implementing the stimulus package] will cost us dearly,” but if the rescue package is employed, will the future price paid cost us and our markets even more?
Some economists and analysts believe that Biden’s intended fiscal stimulus will have some potential abiding concerns for the economy and remain firmly bearish for the long-term. The rescue package is expected to cause a spike in inflation, weaken the value of the U.S. dollar, and potentially catastrophize the centralized monetary system. Additionally, markets may suffer as higher interest rates or tax hikes cap equity valuation and take a toll. Unless Biden and his administration can combat the predicted resulting inflation from the fiscal stimulus, the increased supply of currency in the United States may cause some to seek refuge from the declining United States dollar. Citizens and investors, alike, may turn to cryptocurrency to hedge against inflation.
Citizens and investors, alike, may turn to cryptocurrency to hedge against inflation.
In fact, Biden’s rescue package may be the added dry powder, boosting the mass adoption of cryptocurrencies, like Bitcoin; thus, triggering the next bull run.
As more money floods the economy and heads towards crypto assets, there is expected to be an institutional shift in investing allocation. Within the last year, following stimulus check announcements and distributions, markets saw an uptick in the price and demand of Bitcoin. Although it is surprising that Biden’s stimulus package announcement did not trigger a bullish response by the Bitcoin market, many economists and analysts agree that as the dollar’s purchasing power continues to erode, Bitcoin and other cryptocurrencies will rally. A “Crypto-Nation” is approaching in the near future and Americans should get ready.