Have Stimulus Controls Increased Bitcoin Trading?

In 2020 and 2021, the US federal government sent thousands of dollars in stimulus money to American families. This included two checks under the Trump administration as well as a stimulus check payment under the Biden administration.

Many Americans have spent their stimulus money on necessities or used the money to pay down debts or increase their emergency funds. But a substantial number of people have also invested their money in the hope that they can earn a return on the funds and turn their stimulus checks into more money.

There are many different investment options for people who choose to put their money to work for them. One of them is cryptocurrency. Cryptocurrencies, or virtual coins, have become an increasingly popular investment in recent years. Although these are volatile investments, the technology behind many virtual coins has shown promise. And as the cryptocurrency market has grown rapidly, an increasing number of brokerage firms are allowing these digital currencies to be purchased.

A big question, however, is whether – or how – the stimulus checks affected interest in cryptocurrencies. And the Federal Reserve Bank has data on this very issue.

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Here’s what the data shows on stimulus checks and cryptocurrencies

According to the Federal Reserve Bank of Cleveland, there has been “a significant increase in Bitcoin purchase transactions” amounting to $ 1,200. This increase occurred after the distribution of the first stimulus checks authorized by the CARES Act in April 2020. These stimulus checks amounted to $ 1,200 per eligible adult, which is why the number of $ 1,200 was relevant. to determine the impact of stimulus checks on Bitcoin shops.

The Federal Reserve Bank has determined that in total, Bitcoin’s trading volume increased by about 3.8% in response to the distribution of the first stimulus check. The majority of people who used their first COVID-19 stimulus payment to buy Bitcoin turned out to be people without families, and most of them were non-professional investors.

While only a small percentage of the money from the coronavirus stimulus – around 0.02% of all CARES law funds distributed – was invested in Bitcoin, the money from the payments actually had a fairly measurable impact. on the price of Bitcoin. Specifically, the increased transaction volume and stimulus-induced demand led to a 7 basis point increase in the price of Bitcoin.

It wasn’t just Americans who used their stimulus funds to buy cryptocurrencies. The Federal Reserve has also conducted an analysis of other countries whose governments have offered similar stimulus funding programs to their citizens. The analysis revealed that there was also an increase in the number of people buying Bitcoin in the currencies of these countries.

While this data is only related to the first of three stimulus payments, it is likely that subsequent payments would also have had a similar effect – especially since the stimulus checks were considered conclusively to increase buying. of Bitcoin in several different geographic locations. .

Naturally, it makes sense that when people get unexpected funds, some people who don’t need the money for other things invest the money. The results suggest that if more stimulus checks are issued in the future, as many people demand, it is likely that there will be further increases in Bitcoin and potentially other types of crypto investments. currency in the future.

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