The massive ‘helicopter’ drop of cash could boost bitcoin even further, say reports.

Crypto aficionados are eagerly looking forward to a new stimulus plan worth $3 trillion from U.S. President-elect Joe Biden. Though it is meant to be a rescue package for millions of Americans reeling from the economic damage from the virus, it may undercut the value of the dollar. However, that does not appear to be a concern for Biden, given his recent statement: “Economic research confirms that with conditions like the crisis today, especially with such low interest rates, taking immediate action – even with deficit financing – is going to help the economy.” (Coin Telegraph)

Two-pronged relief

Biden intends to get $1,400 cash into the hands of each American. This would be in addition to the $600 in cash Congress approved last month.

Also on the cards is a $3 trillion tax and infrastructure package – a part of his “Build Back Better” program.

All of the above plus the steps already taken by the Trump Administration along with the Fed measures to stem a liquidity crisis could further debase the value of the U.S. dollar.

The U.S. dollar index is already hovering around 2018 lows. A break below that level may trigger a fresh plunge.

The most commonly heard narrative supporting the bullish prospects of bitcoin is its perceived ability to serve as a hedge against the depreciating value of the dollar.

In that respect, bitcoin has also gained ascendancy over gold. Note that gold has been the traditional haven for protection against inflation and turmoil, especially in the financial markets.

It is therefore not surprising that crypto votaries and even large investment banks such as JPMorgan (NYSE: JPM) predict fancy targets for bitcoin.

But investors should be cautious. There is a rising swell of opinion that bitcoin may be a bubble.

Bank of America (NYSE: BAC): “Mother of all bubbles”

Michael Hartnett, the chief investment strategist at Bank of America Securities, said Friday that bitcoin looks like “the mother of all bubbles.”

He likened it to previous flame-outs that damaged investors’ financial health. These include the 400% surge in gold prices in the late 1970s and Japanese stocks in the late 1980s. He also cited the dot-coms in the late 1990s and housing prices in the mid-2000s.

UK’s FCA warns crypto investors they could lose their shirts

The U.K.’s Financial Conduct Authority warned investors today that investments in cryptos and crypto lending products come with “very high risks,” according to CNBC.

“The FCA is aware that some firms are offering investments in crypto assets or lending or investments linked to crypto assets, that promise high returns,” the regulator said.

“If consumers invest in these types of products, they could lose all their money.”

Bitcoin: gut-wrenching volatility

After hitting a new high of nearly $42,000 last week, bitcoin is currently trading at $33,526 – a cut of over 18%.

That’s a big slide and lends weight to the FCA’s concerns, Biden’s stimulus notwithstanding.

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