The Dow Jones Industrial Index (DJIA) ended Tuesday on a bright note with an 11.37% gain. US stocks saw an uptick in sentiment as the government and Treasury neared confirmation for a $1.6 to $2 trillion fiscal stimulus plan. With the Fed also promising $4 trillion in liquidity, is there a bullish case for Bitcoin?<\/p>\n
The global economy faces its most pertinent threat in over a decade in the form of the coronavirus. Politicians are banding together to find a solution to any adverse impact the virus will have on the economy.<\/p>\n
Over the last decade, the Federal Reserve has helped prop up markets by giving financial institutions low-cost liquidity against Treasury bills.<\/p>\n
A fiscal stimulus deal worth at least $1.6 trillion, per Senate minority leader Chuck Schumer, is almost confirmed. This is intended to aid the American people through a looming unemployment crisis. American stocks had an astounding response to this news, recording their highest daily gain since 1933.<\/p>\n
Although Bitcoins correlation to gold has been subject to widespread attention, this has been superseded by its correlation to the US stocks in the last two weeks.<\/p>\n
Now, with such a high correlation between the two asset classes, an improved outlook for equities could result in enhanced sentiment for cryptoassets.<\/p>\n
Cryptocurrency analysts are hard at work debating the effects of the latest quantitative easing on Bitcoin. Some speculate that financial institutions holding low-cost money may turn to Bitcoin.<\/p>\n
As it stands today, however, institutions arent betting on Bitcoin to do any better than their favorite stocks. Furthermore, if the global economy enters a recession, investors are not likely to allocate capital to risk-assets in the near term, even with the extra stimulus.<\/p>\n
However, the coronavirus, which is the largest headwind for the economy, seems to be steadily getting worse in the United States. This paints a bearish picture for risk-assets for the foreseeable future.<\/p>\n
Once concluded, a large portion of the extra money in the economy will be simultaneously pushed into risk-assets. Bitcoin enthusiasts can only hope that the top crypto remains coupled to the broader economy. Only time will tell which narrative BTC assumes during the length of the crisis.<\/p>\n
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