The U.S. Federal government is currently weighing options as to whether or not to provide Americans with another round of stimulus checks in 2020. So far, that possibility doesn’t exactly seem immanent. Republicans and Democrats are still going back and forth on the issue and right now, the answer seems like a no.
Meanwhile, north of the border, Canadians are still getting stimulus checks worth $2,000 Canadian per month and even if they’re not technically eligible for the money, they can still take it now and pay it back as a loan at a later date.
Regardless of how stimulus funding is being handled in different countries, the stimulus money isn’t just devaluing fiat currencies, it may just be adding to the market caps of cryptocurrencies. This begs, the question:
What would happen if every North American bet their stimulus check on Bitcoin? The answer may surprise you!
Investing in Bitcoin with Original Stimulus Check
Believe it or not, there is an entire Twitter account tracking the amount of money that Americans are putting into Bitcoin and other digital currencies with stimulus funding. It starting doing so back in April, with the Trump administration sending out checks for up to $1,200 a month. The Twitter account shows that an inordinate amount of transactions went through Bitcoin’s blockchain for exactly $1,200 a month.
Correlation doesn’t necessarily equal causation of course, so more stimulus money doesn’t necessarily mean a higher Bitcoin price for the rest of 2020. Whatever happens next, investors are taking a calculated gamble either way.
How More Stimulus Money Could Turn Bitcoin Bullish
Making the case for an astronomic rise in the price of Bitcoin and other cryptocurrencies thanks to more stimulus money sitting in the pockets of millions of Americans is easy.
It’s that people are going to be happy with the recent pullback in Bitcoin’s price to the $10,000 mark. They (like everyone else) saw the price of Bitcoin rise in April and are willing to take the gamble on that happening again. They likely also believe in the long-term prospects of the economy, their own personal situation and the blockchain enough to keep that stimulus money on the blockchain.
Counterpoint: Money Could Turn Bitcoin Bearish
Here’s the thing about the blockchain. As great as it is, a huge influx of money coming in all at once will actually clog up the blockchain, slow down transaction speed, increase transaction costs and make it very difficult for investors to enter and exit the crypto world.
This might actually cause the price of Bitcoin to suddenly collapse, as new entrants into the crypto game will quickly get turned off by fees, extended confirmation times and a lack of understanding for how to use Bitcoin, whether as an investment or day-to-day payment solution.
Another Bearish Possibility for Bitcoin
A popular belief surrounding cryptocurrency appears to be losing more and more steam as the days go by is that Bitcoin is a great hedge against a downturn in the broader economy and the stock market. But the onset of the coronavirus spreading in March, and the downturn in tech stocks over the last two weeks is proving that theory wrong.
Bitcoin cratered in March while the S&P 500 dipped nearly 30% during that time. In the last two weeks, Bitcoin is flirted with a drop below $10,000 USD after failing to rise above $12,000. It’s clearly no coincidence that top tech stocks like Apple are also dipping quite a bit in recent weeks.
Thus, the idea that Bitcoin is a great hedging tool is dying.
So is Gambling on Bitcoin a Good Idea?
The choice really is yours on this one. Whether you’re an avid gambler with a high-risk tolerance, or a casual dabbler willing to take a risk with your stimulus money, the bottom line is that while the future for Bitcoin certainly is bright, its not a guarantee.