Have Stimulus Controls Increased Bitcoin Trading?


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In 2020 and 2021, the U.S. federal government sent thousands of dollars in stimulus money to American families. This included two checks under the Trump administration as well as a stimulus check payment under the Biden administration.

Many Americans have spent their stimulus money on basic necessities or used the money to pay down debts or increase their budgets emergency fund. But a significant number of people also invested their money with the hope that they could earn a return on funds and turn their stimulus checks into more money.

There is a lot of different investment options available to people who choose to put their money to work for them. One of them is cryptocurrency. Crypto-currencies, or virtual coins, have become an increasingly popular investment in recent years. Although they are volatile investments, the technology behind many virtual coins has shown promise. And as the cryptocurrency market has grown rapidly, an increasing number of brokerage firms allow you to buy these digital currencies.

A big question, however, is whether – or how – the stimulus checks affected interest in cryptocurrencies. And the Federal Reserve Bank has data on this very issue.

Here’s what the data shows on stimulus checks and cryptocurrencies

According to Federal Reserve Bank of Cleveland, there was “a significant increase in Bitcoin purchase transactions” amounting to $ 1,200. This increase occurred after the distribution of the first stimulus checks authorized by the CARES Act in April 2020. These stimulus checks amounted to $ 1,200 per eligible adult, which is why the number of $ 1,200 was relevant. to determine the impact of stimulus checks on Bitcoin shops.

The Federal Reserve Bank has determined that in total, Bitcoin’s trading volume increased by about 3.8% in response to the distribution of the first stimulus check. The majority of people who used their first COVID-19 stimulus payment to buy bitcoins turned out to be individuals without families, and most of them were non-professional investors.

While only a small percentage of the money from the coronavirus stimulus – around 0.02% of all CARES law funds distributed – was invested in Bitcoin, the money from the payments actually had a fairly measurable impact. on the price of Bitcoin. Specifically, the increased transaction volume and stimulus-induced demand led to a 7 basis point increase in the price of Bitcoin.

It wasn’t just Americans who used their stimulus funds to buy crypto-currencies, That is. The Federal Reserve has also conducted an analysis of other countries whose governments have offered similar stimulus funding programs to their citizens. The analysis revealed that there was also an increase in the number of people buying Bitcoin in the currencies of these countries.

While this data is only related to the first of three stimulus payments, it is likely that subsequent payments would also have had a similar effect – especially since the stimulus checks were considered conclusively to increase buying. of Bitcoin in several different geographic locations. .

Naturally, it makes sense that when people get unexpected funds, some people who don’t need the money for other things invest the money. The results suggest that if more stimulus checks are issued in the future, as many people are asking, it is likely that there will be further increases in Bitcoin and potentially others. types of cryptocurrency future investments.

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