When U.S. Congress approved Biden’s $ 1.9 trillion pandemic stimulus package last week, the crypto market boomed as Bitcoin hit an all-time high.
The largest cryptocurrency surged to over $ 61,500 on optimism that the stimulus payments would be a boon to the month-long rally in digital assets. With traditional stock markets showing mixed signals with a string of bad news on Monday, Bitcoin fell more than 10% alongside the broader crypto market.
Analysis of the effects of stimulus tests on the crypto market
Since then, the digital token has made up most of its losses and retested previous highs. But can the $ 300 billion stimulus checks push Bitcoin and other altcoins to new highs? The answer is unlikely. When the first stimulus checks came in over the past few days, the number of crypto-exchange deposits increased, as shown below.
Lots of small USDT inflows on exchanges.
Take a look at the density of TX counting spikes over the past week. pic.twitter.com/IJmS8I5prM
– Lex Moskovski (@mskvsk) March 19, 2021
However, a more precise representation of the capital inflow into the crypto market would be the total volume of foreign exchange deposits. Taking a closer look at the total inflows in USDT (tether), we can see that the total volume increased to USD 1.5 billion on the first day after the stimulus checks arrived, with daily exchange rate inflows gradually declining to around USD 700 million. From this on-chain data, it can be seen that the stimulus tests had negligible impact at best.
ON current survey Mizuho Securities said that nearly $ 40 billion of stimulus checks could be issued on stocks and cryptos in the weeks that followed. It could be possible that not all stimulus tests had a noticeable impact on cryptos. However, the Internal Revenue Service (IRS) reported two days ago that more than 90 million stimulus checks worth $ 242 billion had been performed. This meant that around 80% of checks nationwide had already been requested.
What does it all mean? One possible explanation is that analysts grossly overestimated the importance of stimulus checks and over-optimism from traders led to the surge last weekend. Another possibility is that the potential inflow of capital from economic reviews has been negated by bearish news from The Indian government is proposing a total crypto ban and a Whale allegedly dumping positions on Gemini platform. In the latter case, another major catalyst may be needed for cryptos to continue their rally.
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