(Editor’s Note: First Mover will not be released on Monday, January 18, in honor of Martin Luther King Jr. Day in the US, a CoinDesk corporate holiday. The cryptocurrency market will be open as always.)
Bitcoin (BTC) was lower, trading at $ 38,000, where prices have risen over the past week.
The market is facing around $ 41,000 of price resistance, with around $ 34,000 of support, Mark Warner, head of trading at London-based BCB Group, a financial firm focused on digital assets, said in comments that emailed by a spokeswoman.
“A move above $ 42,000 is likely to resume the heady gains we saw last week,” Warner said. Prices are up 29% through 2021, down from a 0.4% year-to-date loss for the Standard & Poor’s 500 index of large US stocks.
In traditional markets, Asian and European stocks fell, and U.S. stock futures fell on Friday as expectations of Joe Biden’s $ 1.9 trillion relief proposal launched late Thursday on sobering assessments of the economy led. Gold was hardly changed at $ 1,847 an ounce.
Market moves
First Mover wrote last October how a “blue wave” in the upcoming US election – full control of the government by Joe Biden’s Democratic Party – could result in trillions of dollars in new government spending on coronavirus aid and economic stimulus.
That wave has arrived in the form of a $ 1.9 trillion coronavirus relief package proposed by US President-elect Biden late Thursday. And some Wall Street analysts are now openly wondering whether the economy and markets are becoming dependent on incentives.
“The market is returning to the expectation that further fiscal stimulus is as good as inevitable,” wrote Ed Mills of the stockbroking firm Raymond James in a statement to customers early Friday.
Cryptocurrency investors could jump straight to the implication: the Federal Reserve may need to print trillions of new dollars to fund additional U.S. Treasury Department loans. This, in turn, could spur demand for Bitcoin, which a growing number of investors see as a hedge against inflation.
“Stimulus targets could steadily increase if the coronavirus pandemic strikes back, and that was one of the main reasons many continued to pile into Bitcoin,” said Edward Moya, a New York-based senior market analyst for the London-based foreigner . Stockbroker Oanda wrote in an email note.
Biden’s proposal, announced in a speech, will provide $ 1 trillion for families and individuals and more than $ 400 billion to fight the pandemic directly, including money to expedite vaccine use and keep schools safe to open, according to the New York Times. There is also $ 350 billion in aid to state and local governments.
Democrats, who are slated to become the majority party in both houses of Congress, could, according to Raymond James’ Mills, use a “budget vote” process to pass the legislation by a simple majority.
“We would find that this would not prevent them from creating a second reconciliation package later this year,” wrote Mills.
During fiscal 2020, which ended in September, the U.S. budget deficit hit a record $ 3.1 trillion, created by the government bailout packages signed by President Donald Trump when coronavirus-related lockdowns ravaged the economy.
Ian Shepherdson, chief economist at forecasting firm Pantheon, predicts the US budget deficit could hit $ 4 trillion in the current fiscal year.
Given that the economy is now suffering from the recent surge in coronavirus-related cases and the introduction of vaccines is still months away, budget discipline looks unlikely. A government report on Thursday found a higher than expected increase in weekly jobless claims to 965,000, the highest since August. Last year’s shift towards remote working is another potential source of widespread upheaval.
Not to be feared. Scott Anderson, chief economist at the San Francisco-based Bank of the West, a unit of the French giant bank BNP Paribas, told customers on Thursday: The promise to receive more tax aid from the Biden government soon should hit the unemployed and businesses alike Provide much-needed assistance during the current quarter until services businesses are allowed to reopen when more Americans receive the vaccine. ”
The US government’s national debt, which was approximately $ 5.7 trillion in 2000, now rises to $ 30 trillion.
Source: Federal Reserve Bank of St. Louis
The US national debt is already $ 27.7 trillion, and analysts say the Fed would likely need to help fund additional government bonds with more government bond purchases in what was once considered an emergency measure.
“Taxes will go up, but they’re unlikely to go up by an additional $ 4 trillion in a year,” Dick Bove, a longtime banking analyst who now works for brokerage firm Odeon, told clients Thursday. “So the Fed has to intervene. This can cause the dollar to drop significantly, inflation to rise, and interest rates to become a problem. It is a worrying situation that a President Biden may not be able to control. “
Earlier this week, the President of the Federal Reserve Bank of Dallas, Robert Kaplan, who sits on the Federal Reserve’s Monetary Policy Committee, suggested that officials might consider extending their ongoing $ 120 billion bond purchases later this year. Dollars per month that were initially implemented could reduce as an emergency measure.
The drama was short-lived, however, as Fed chairman Jerome Powell quelled speculation on an impending rejuvenation on Thursday. “Now is not the time,” he said during a virtual discussion.
Bank of America estimates the Fed’s balance sheet will be $ 8.8 trillion by 2021, up from $ 7.4 trillion on Wednesday. Before the pandemic broke out in early 2020, it stood at $ 4.2 trillion.
But even these estimates can change.
“Depending on the extent of the US fiscal expansion and deficits in the coming years, there is a risk that the Fed may not be able to withdraw completely from the US financial market for fear of disorderly market conditions,” wrote the economists at Bank of America this week.
The result for crypto traders and investors? If Bitcoin is a hedge against Federal Reserve money printing, the use case doesn’t seem to go away anytime soon.
Bitcoin clock
Bitcoin’s two-day rally stalled as the US dollar gathers ground following President-elect Joe Biden’s proposal of $ 1.9 trillion in tax incentives.
The cryptocurrency changed hands for around $ 39,600 when Biden spoke at around 12:15 a.m. (UTC). Since then, prices have dropped to around $ 38,000 based on CoinDesk 20 prices.
The pullback marks a weak episode of the two-day rise with prices hitting the $ 40,000 resistance again. The lack of an optimistic response from the Bitcoin market is perhaps surprising as fiscal and monetary incentives are viewed as inflationary and Bitcoin is viewed as a store of value by a growing number of investors.
The strength of the US dollar against major currencies could be a spoilsport with the greenback gaining ground in the currency markets early Friday. Over the past year, Bitcoin prices have shown an increasingly negative correlation with the US dollar, which means that they usually move in opposite directions.
Read More: Biden’s $ 1.9T Relief Package Proposal May Not Move Bitcoin Market
What is hot?
Paxos is partnering with Chainlink to make its asset-backed tokens Paxos Standard (PAX) and Paxos Gold (PAXG) more widely available in DeFi (CoinDesk).
Some Asian Traders Use Polkadot To Predict Bitcoin’s Future (CoinDesk)
Fed Chairman Jerome Powell sees “years instead of months” before the digital dollar is released (CoinDesk)
Grayscale brings in $ 3.3 billion in the fourth quarter of 2020 (CoinDesk) and increases reserves by 2,000 + BTC on the first day after a three-week break for new investments. The additional reserve is 2.4 times the number of new bitcoins minted by the blockchain (decrypt) (Editor’s note: Grayscale belongs to the Digital Currency Group, which CoinDesk also belongs to.)
Trading with the BTCEetc Bitcoin Exchange Traded Crypto (BTCE) on Deutsche Börse in Germany has risen to a level that is normally only seen in the most popular European ETFs (FT).
With the Lido protocol, a new DeFi and staking protocol, users can plug ethers into Ethereum 2.0 and at the same time receive “tokenized staked ethers” with a similar value (CoinDesk).
Bahamas-based Deltec, Bank to Tether, says it is investing customer funds in Bitcoin and again raises questions about whether the USDT dollar-linked stablecoin might be backed by Bitcoin (CoinDesk).
Galaxy Digital Launches Proprietary Mining and Miner Financial Services (CoinDesk)
Some analysts (and data) doubt that Bitcoin miners were responsible for the recent price declines (CoinDesk).
Analog
The latest on economics and traditional finance
Unemployment claims rise faster than expected to 965,000, the highest weekly figure since August (CNBC).
The retail arm of Thai state-owned energy giant PTT plans to go public with a donation target of 54 billion baht ($ 1.8 billion), which may be a sign of a booming year (Nikkei Asia Review).
The Australian fintech company AfterPay becomes the 13th largest share by market capitalization on the ASX after a coronavirus pandemic (Australian Financial Review).
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