A mountain of fresh U.S. debt contrasts with a mountain of institutional cash potentially set to flow into Bitcoin thanks to major FOMO.
Bitcoin (BTC) starts another week aiming for $19,500 and beyond as crunch time for Brexit meets mass U.S. money printing.
Cointelegraph takes a look at the price factors at stake for Bitcoin this week as shaky $19,000 support remains in play.
$7 trillion money printing?
The more controversial elements of U.S. President-elect Joe Biden’s future tenure are already becoming clearer — and it’s good news for Bitcoin.
As his inauguration edges closer, Biden has already said that he plans a $7 trillion recovery package to tackle the impact of coronavirus. This would add a huge new chunk of debt to the already huge mountain that the U.S. has accrued this year.
Against the backdrop of an already weakening dollar, the U.S. could thus face a potent cocktail of dangerous economic factors driving down wealth. The appeal of a safe haven has thus never been so real.
“We had a horrible time in 2008 because of too much debt, and since 2008, the debt everywhere has skyrocketed. We can’t even count how much the debt is up,” Jim Rogers, co-founder of the Quantum Fund with George Soros, said at an investment summit last week quoted by Reuters.
“If Janet Yellen is the next Secretary of the Treasury, she loves to print and spend money.”
As Cointelegraph reported, the strength of the dollar is predicted to fall further in 2021, something that has traditionally buoyed Bitcoin. The greenback is already at its weakest against a basket of trading partner currencies since April 2018.
As an indication of the direction the U.S. is headed, meanwhile, Preston Pysh noted the opposing direction of U.S. debt versus M2 money velocity.
“Check out the disparity on these two charts -just in 2020 alone,” he mentioned to Twitter followers.
“A growth in M2 money supply by +22.5%. Velocity of money DOWN by -20%. Printing is nesting itself into bonds and stocks. It's causing massive destruction of the middle class. You might want to checkout Bitcoin.”
Stimulus coming but without checks
New debt may come a lot sooner than even Biden can summon. As Senators began hinting on Sunday, a new coronavirus stimulus package could appear as soon as Monday.
Subject to voting, the bill would come with a price tag of almost $1 trillion and provide “targeted relief,” Democratic Senator Mark Warner of Virginia told CNN.
“I think we have got the top line numbers done. We are working right now on language so that we can have — as early as tomorrow — a piece of legislation,” he claimed.
The new stimulus bill has seen little progress despite promises from Treasury Secretary Steven Mnuchin months before. A second stimulus check of $1,200 for eligible Americans, however, no longer features in the latest proposals.
The first $1,200 stimulus check from mid April would be worth almost $4,000 if invested in Bitcoin at the time.
UK meets its Brexit Waterloo
It’s make or break for the United Kingdom and the Euopean Union agreeing a Brexit trade deal.
After many a delayed deadline and last-ditch efforts to resolve their differences, the two sides now accept that time has run out and that only a matter of days — or less — stands between the U.K. leaving with a deal or crashing out of the E.U.
“We keep calm as always and if there is still a way, we will see,” the E.U.’s chief negotiator Michel Barnier told reporters over the weekend.
The pound was suppressed on Monday as uncertainty took hold, and a surprise lack of a trade deal would automatically shave off more of its value, analysts said last week.
As with any major geopolitical event, the potential for Bitcoin to profit briefly from the shockwave remains, this likely to come later on Monday.
As Cointelegraph reported last week, Nigel Farage, formerly the head of the pro-Brexit U.K. Independence Party, described Bitcoin as the “ultimate anti-lockdown investment” in reference to London’s harsh restriction of individual freedoms over the coronavirus.
Buzzword institutional FOMO
Within Bitcoin, attention remains fixed on whether more “fear of missing out,” or “FOMO,” from institutional investors will see more mass buy-ins and a squeeze on the supply.
Even mainstream media is entertaining the idea of a price transformation thanks to large-volume players entering, something which is all the more possible thanks to the Federal Reserve propping up equities markets and creating artificial competition.
Grayscale, the investment giant with over $10 billion in Bitcoin assets under management alone, would be the first industry heavyweight to benefit under such circumstances.
“Institutional investors are keen on portfolio construction in the wake of Covid, and the ways they need to reposition themselves given how governments have injected stimulus into the system,” managing director Michael Sonnenshein told Bloomberg.
Signs that more cash is coming to Bitcoin already abound. Just last week, Guggenheim revealed that it had reserved the right to buy into Grayscale’s Bitcoin Trust via its $5.3 billion Macro Opportunities Fund.
Regardless of who and how, institutional FOMO places more pressure on the dwindling Bitcoin supply, with price rises versus other assets the only logical outcome.
Henri Arslanian, Global Crypto Leader at PwC, summarized the situation to to Bloomberg:
“The question investors will ask fund managers will gradually switch from ‘why did you invest in crypto?’ to ‘why have you not yet invested in crypto?’”
BTC/USD at crucial resistance
Focusing on short-term price action, meanwhile, Bitcoin is at a crossroads, Cointelegraph Markets analyst Michaël van de Poppe says.
In his latest market update on Monday, Van de Poppe noted that at $19,200, BTC/USD could either retest $19,500 or try to break lower during trading.
Both levels are significant. A shot above $19,500 would open up a clear move to expand on last week’s all-time highs, possibly with a top as high as $21,000.
Conversely, break below $18,600 again and real support may only emerge much lower — possibly beneath $17,000.
“Overall… we are in range resistance, which means no entries until the gain of the level,” he summarized while waiting for $19,500 to appear.
Van de Poppe also noted that CME futures gaps, including a giant $1,300 void from last weekend, remain a major nearby chart feature. A drop to just below $17,000 would fully "fill" the larger gap.