A massive $2 trillion coronavirus stimulus package has been agreed by U.S. president Donald Trump and the Senate.
Bitcoin and crypto, as well as traditional markets, have already been significantly boosted by the historic economic relief package, with almost all assets climbing this week in anticipation of the deal.
The bitcoin price, which has climbed from lows of under $4,000 per bitcoin to around $7,000 in the past two weeks, remains highly volatile—but the bitcoin and cryptocurrency community is convinced the "largest rescue package in American history" will mean a surge in bitcoin and crypto interest.
Larry Kudlow, U.S. President Donald Trump's chief economic adviser, called the package "the single ... [+]
Full details of the huge coronavirus stimulus package have yet to be released, with some early drafts including proposals for a hotly-anticipated so-called digital dollar, but $350 billion is expected to be set aside for small business loans, $250 billion in unemployment insurance benefits, and $500 billion in loans for distressed companies.
Senior lawmakers have indicated an initial proposal by Republicans for direct cash payments to the tune of $250 billion has been included.
"This legislation is urgently needed to bolster the economy, provide cash injections and liquidity and stabilize financial markets to get us through a difficult and challenging period in the economy facing us right now," said Larry Kudlow, chief economic adviser to the president, adding this is "the single largest main street assistance program in the history of the United States."
Meanwhile, the U.S. Federal Reserve is expanding its balance sheet—when the dust has settled the Fed could have a balance sheet, consisting mainly of the bonds it has purchased to support markets and the economy, of around $10 trillion.
"As things stand the Fed is racing very quickly towards a $7 trillion balance sheet and our best guesstimate is that it might peak in the very broad vicinity of $9 or $10 trillion," Krishna Guha, head of global policy and central bank strategy for Evercore ISI wrote in a note to clients. "This is monetized credit policy and fiscal-monetary support on a grand scale."
The bitcoin and cryptocurrency community reacted with a combination of astonishment and celebration at the bazooka being leveled at the U.S. economy.
"The Fed's $6 trillion stimulus plan would be enough to buy the entire market cap of Bitcoin more than 48 times," Anthony Pompliano, a well-known bitcoin bull and partner at bitcoin and crypto-focused hedge fund Morgan Creek Digital, said via Twitter.
"[They're] pumping bitcoin," tweeted blockchain consultant and bitcoin developer Luke Dash.
"It's time to move your fiat into [bitcoin]. There is no way your dollars can keep their value after pumping $6 trillion into the system," Jason Yanowitz, the co-founder of bitcoin, crypto and blockchain events and media company BlockWorks, said via Twitter.
“If there was ever a time—debasement of fiat currencies, monetization of trillions of dollars of debt, this is the time for bitcoin," crypto investor and chief executive of bitcoin hedge fund Galaxy Digital, Mike Novogratz, told CNBC, adding "If at the end of the year bitcoin’s not a lot higher, I’m going to scratch my head and say, 'Look, what the heck is going on?'"
Some have questioned why then the bitcoin price hasn't reacted more quickly to the stimulus, however, with bitcoin and crypto supporters attempting to explain the delay.
The bitcoin price, after taking a huge step lower earlier this month, has rallied hard over the last ... [+]
"These changes take time to propagate in the economy," the chief executive of the world's largest bitcoin and crypto exchange Binance, Changpeng Zhao, wrote in a recent blog post.
"Changes don’t happen immediately when a mass population is involved. There are other more practical aspects of speed. Due to inefficiencies in fiat transfers, it takes time for people to deposit money into crypto exchanges to buy bitcoin. There is always a delay in the market."
The massive U.S. stimulus plan, not to mention other packages being prepared by governments and central banks around the world, will easily surpass the response to the 2008 financial crisis in terms of timing, intensity and monetary value—but still might not be able to support markets and the economy.
"This pandemic has already caused a huge shock to demand, and if you combine that with what will undoubtedly be some horrific data over the next few months, then the spending bill probably still won’t be enough," said Brian Kloss, manager of the Legg Mason Brandywine Global Income Optimiser fund.
The government's commitment to what's disparagingly called "quantitative easing to infinity" and a "do whatever it takes" attitude, could eventually undermine confidence in the financial system.
Governments and central banks around the world have shown people a glimpse of the man behind the curtain—and a growing number will conclude this emperor has no clothes.
