Bitcoin refreshed its all-time high during the early Asian session Tuesday as traders assessed the prospects of Joe Biden’s latest push to pass his ambitious $1.9 trillion stimulus package.
The Financial Times reported late Monday that the US president would make official trips outside Washington to put his expansive aid proposal before the public. In doing so, he aims to pressure Congress into closing negotiations over the coronavirus package, especially as Republicans on Capitol Hill worry that its excessiveness would add to the public debt.
But with polls showing that the US public supports receiving direct payments, some of which include a $1,400 benefit for individuals and extra help for the unemployed and parents, the Democrats believe that mounting public pressure would sway some Republicans into supporting Mr. Biden’s proposal.
Allianz Economist Sees Bitcoin Boom
The news has worked as a headwind to the bearish bias renewed at the start of this week in the Bitcoin market. On Monday, the benchmark cryptocurrency fell by as much as 5.79 percent amid an intensifying profit-taking round among daytraders. A day before, it had surged exponentially to log a new record high of $49,700 (data from Coinbase).
But on Tuesday, the bids for the BTC/USD exchange rate climbed to as high as $49,872.
Mohamed A El Erian, the chief economic adviser at Allianz, looked at the ongoing rally as a “rational bubble” driven by fears of inflation among retail and institutional investors alike. He cited a flurry of recent corporate investments into Bitcoin, including Tesla’s $1.5bn capital injection, that has the credibility to inflate the price bubble even higher.
“In addition to massive central bank liquidity injection, there are now massive fiscal injection prospects on the top,” Mr. Erian told CNBC. “So basically, the investors feel confident in riding what appears to be a massive liquidity wave.”
“You’ll see more companies [add bitcoin to their balance sheets] because they don’t know how else to mitigate risk. So, it’s part of the distortion of financial markets that we see more generally,” he added.
Many cryptocurrency analysts now agree that Bitcoin would achieve record levels above $50,000 this week despite failing to close above the target after multiple attempts.
Ki-Young Ju, the chief executive officer at CryptoQuant—a South Korea-based blockchain analytics firm, noted a spike in stablecoins reserves across all the exchanges. He noted that traders would use the sitting dollar-pegged token supply to purchase Bitcoin and other cryptocurrencies.
“This $50k battle is about Coinbase whales(USD) vs. Stablecoin whales(USDT),” the analyst added. “Negative Coinbase premium, but plentiful stablecoins in exchanges. Negative Premium should be cooled down to get another leg up.”