Will Americans Use A Second Stimulus Check To Buy Bitcoin?

October 15th, 2020

Will Americans Use A Second Stimulus Check To Buy Bitcoin?

Following the COVID-19 pandemic and the recession the US Government introduced a series of economic measures to stimulate the economy, not least of which was the stimulus relief checks issued in April as part of the $2.2tn stimulus bill. At the time, for the vast majority of Americans the check was used for basics, whether paying the rent or buying food. But for a clued-up minority the check was an opportunity to invest in bitcoin, to take a small risk in purchasing the cryptocurrency for the first time perhaps, in the hope it would provide a healthy return over the months and years to follow.

Not only did the percentage of $1,200 deposits in Coinbase quadrupled in April, a Twitter account @BitcoinStimulus (set up to see how much the stimulus check would be worth if used to buy bitcoin on 15th April), soon gained 13K followers. So when talk of a second stimulus round picked up speed in August, the account showed what the initial stimulus peaking in mid August, $2,200, with over an 80% increase in the value of the $1,200 if you’d invested in bitcoin.

When talk of a second check gathered momentum in the summer not surprisingly people began to wonder if this would be good news for bitcoin investors and the price of bitcoin. Despite this optimism, some questioned what would happen if the second time round the penny dropped and a large group of people decided to bank their second $1,200 in bitcoin. Chief amongst these naysayers was the self-styled ‘Original Crypto Guy’ Jason Deane, who suggested that this mass movement of small bitcoin investors each clutching their checks could pose a real threat to the survival of bitcoin!

With the second stimulus round likely to cost the US Government around $300bn, the net effect “is that this level of demand, chasing a very low supply, would quickly create an impossible-to-imagine jump in the dollar price of bitcoin,” argues Deane. “Bitcoin would go from being worth thousands of dollars to millions of dollars in a few days — the biggest price increase in history. And that would have consequences,” he suggests. What’s more he argues the knock on effect would be rapid and dramatic as folks scrambled to buy bitcoin which was rapidly increasing in value. This boom would encourage a market also ripe for scammers to take advantage of newbie investors, the load on the system would increase the fees for settlement into thousands of dollars, and investments in traditional assets like gold and property would be sold to cash into the great bitcoin boom! “In other words, it would be a bubble of such epic proportions that it would relegate the South Sea events and tulip bulb mania to mere blips on the historical chart,” concludes Deane.

Of course, this is pure speculation, as Deane himself accepts if only for the simple fact that the long-winded talks which began in July, between Democratic Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, to agree a second stimulus ground to a halt in early October. This despite the fact that as Cointelegraph reported, when U.S. officials first announced the $1 trillion stimulus package on July 23, the price of BTC rose past $9,500, breaking a particularly long stretch of low volatility between $9,000-$9,500. Equally, it’s worth heeding the observation of ‘ChiBitCTy’ on leading community BitcoinTalk, that, “The United States Senate just rejected the most recent stimulus proposal which did not have any plans to include another $1,200 dollar check to individual citizens. I didn’t really think much about the correlation between the stimulus checks and the price of bitcoin going up until I read this article by cointelegraph. https://cointelegraph.com/news/good-for-bitcoin-us-senate-rejects-stimulus-without-1-200-checks

“Since the bill was rejected in what looks like could be in large part because it did not include another round of $1200 checks, means it’s very possible it will be included in the next proposed bill, and therefore another chance for a boost in the arm to bitcoin as it’s likely much of these checks will go to buying bitcoin again as they did before.”

While there’s little chance of a second check to spend on rent, food or bitcoin before the November 3 election. Despite this the likelihood is that any new stimulus will have an even bigger impact on the price of bitcoin. Take for example the suggestion floated by Trump’s communications director that the President is open to an even bigger stimulus package..

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