Digital Assets: How ‘Helicopter Money’ Will Affect Bitcoin and Gold

March 26, 2020 | Digital Assets, News
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It’s here. A $2 trillion package to combat the virus.

The Senate unanimously approved Wednesday a massive stimulus package worth $2 trillion to steady an economy feared to be on the ropes from the coronavirus.

The key components of the relief package, the largest in U.S. history, are:

  • $250 billion for direct payments to individuals and families
  • $350 billion in small billion loans
  • $250 billion in unemployment insurance
  • $500 billion in loans to distressed companies

What would this massive cash injection from the “infinite money machine” that is the Fed do to cryptos?

Bitcoin and helicopter money stimulus

The opinions vary on the impact of the massive stimulus. (CRYPTO NEWS FLASH)

Though the traditional markets such as stocks and bonds have welcomed the stimulus with strong rallies, bitcoin expert Alex Krüger said cryptos do not respond too much to macro events. That’s because they are still a fragmented and illiquid market dominated by a few. In Kruger’s view, the bullish narrative for bitcoin would be based on its halving and the stock to flow model.

Morgan Creek Digital co-founder Anthony Pompliano, however, countered this viewpoint. In his view, the effect of quantitative easing usually percolated to the crypto market after a year or a year-and-half. The potent cocktail for a bullish trajectory of bitcoin is its halving, quantitative easing and interest rate cuts.

Interestingly, through much of the corona crisis, both the S&P500 and bitcoin have moved together in a fairly correlated fashion. Let’s see how this will turn out over the coming months.

Analysts see upside in gold

Meanwhile, the corona crisis and the resulting stimulus are seen as bullish factors for gold.

Riley FBR analysts said on Tuesday that they expect gold to surge to $2,500 an ounce in Q3 and trade around those levels in Q4, too.

“We believe the current macro environment has been primed to drive gold prices to the $2,500/oz level. During such a gold price ascent, gold will be the best performing asset class, and gold-related equities will be the best-performing equity sector,” the analysts wrote.

The main reason for their bullish prognosis is a combination of extremely low rates along with “unprecedented fiscal and monetary stimulus.”

Related Story: Liquid Alternatives: Investors Flock To Gold In Risk-Off Move; Goldman Predicts $1,800

Image Credit (No changes were made): Wikimedia Commons

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