The price of Bitcoin (BTC) reached over $51,000 on March 7 after the U.S. Senate passed the anticipated $1.9 trillion stimulus bill, which is roughly two times larger than the market capitalization of BTC.
United States’ President Joe Biden said that the Senate’s approval shows major progress in delivering a “desperately needed” stimulus bill to Americans. He said:
“Today I can say we’ve taken one more giant step forward in delivering on that promise, that help is on the way. It wasn’t always pretty, but it was so desperately needed, urgently needed.”
Why is the stimulus bullish for Bitcoin price?
When a stimulus bill gets passed, it immediately relaxes the financial conditions in the U.S. The past year has shown that the effect of such measures raises investors’ appetite for risk-on assets, including stocks and cryptocurrencies.
In April 2020, when the first stimulus bill was passed, it coincided with a massive bull run in both the U.S. equities market and the cryptocurrency market.
Naturally, investors anticipate the second stimulus package to have a similar effect on the price of Bitcoin in the short term.
Peter Brandt, a long-time trader, said the devaluation of the purchasing power of the U.S. dollar has only started.
The combination of a devaluing dollar and the new stimulus package would likely cause the market sentiment around Bitcoin to improve. Brandt wrote:
“The devaluation of the purchasing power of the U.S. Dollar $DX_F has only just begun. This is why Bitcoin $BTC, real estate, U.S. equities and commodities will continue to trend higher when expressed in $USD fiat terms.”
If the U.S. stock market begins to recover after a week-long pullback, it could further catalyze Bitcoin given that equities and cryptocurrencies fell in tandem during the recent correction.
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