Here's how US stimulus checks have contributed to Bitcoin price, according to the Cleveland Fed

  • According to Cleveland Fed researchers, only 0.02% of stimulus checks have been employed in Bitcoin purchase or trade.
  • Japan and South Korea also saw a significant surge in Bitcoin markets after their governments' stimulus rounds.
  • Exchanges noted purchases the same size as the issued stimulus checks, but almost exclusively among young single investors.

The COVID-19 stimulus checks issued by the government led to a modest rise in the number of cryptocurrency purchases on exchanges. No significant impact on Bitcoin's price was noted. 

Stimulus checks affect Bitcoin demand and retail crypto trading volume

Now that checks that are part of President Joe Biden's $1.5 Trillion stimulus have started flowing again, crypto traders are waiting to see its impact on Bitcoin's price on exchanges. Cryptocurrency enthusiasts are viewing the "American Rescue Plan" as a rescue for Bitcoin prices, following a sharp drop noted this week.

The two previous rounds of stimulus were $1,200 and last winter's $600 stimulus checks. Putting money directly in the bank accounts of hundreds of thousands of American families meant that citizens affected by coronavirus could pay for food and utilities. It appears that some percentage of the recipients decided to spend their stimulus check dollars for buying Bitcoin and cryptocurrencies on exchanges. 

A surge in buy orders for the entire check, $1,200, was noted in April 2020. Brian Armstrong, the CEO of Coinbase, had tweeted about the percentage of buys/deposits that were the same size as the stimulus check. The tweet has since been deleted, and crypto traders are still waiting for a rise in Bitcoin demand on exchanges.

The latest research put forward by the Federal Reserve's Cleveland branch suggests that it is likely there may be no notable bump in Bitcoin prices. The study has revealed that the Economic Impacts Payment (EIP) program of April 2020 had a significant but modest impact on the BTC/USD trading pair. 

An increase of 3.8% was observed in the trade volume of BTC/USD on exchanges. Further, the trading volume surge represented only 0.02% of EIP dollars and most likely came from individuals without families at exchanges catering to nonprofessional investors. 

The research dubbed the EIP program a positive wealth shock for retail investors. It is important to note an effective increase in trade volume in the BTC/USD pair. However, no effect was observed on sell trades. 

Fed researchers noted a 0.07% permanent price increase and said their findings are "modest compared to the 4.6% standard deviation in Bitcoin's daily price swings." The research results are statistically significant and relevant to the current Bitcoin price action as the next round of stimulus checks have started flowing in. 

The findings are consistent in countries with similar COVID-related stimulus programs like Japan and South Korea. There was a significant increase in Bitcoin buys trades for amounts at or just below the modal stimulus check size once payouts begin. 

Fed researchers have stated that in the USJapan, and South Korea, the increase in Bitcoin buy trades is driven by the direct stimulus payment programs in these countries and cannot be wholly explained by other factors.

The Harris Poll, an American market research and analytics company that conducted a poll in March 2021 researched the percentage of Americans who would spend their next stimulus check on cryptocurrencies. 53% of those who plan to invest money from the new stimulus check (17% of total survey respondents) chose to invest in cryptocurrencies. 

More crypto influencers and analysts have a bullish outlook for crypto and expect further rounds of stimulus checks that drive crypto asset prices higher. In his latest newsletter, Anthony Pompliano, founder and partner at Morgan Creek Digital, said,

History is not necessarily an indicator of the future, but it is hard to imagine a scenario where if we had a second wave of lockdowns, we wouldn't also get more aggressive monetary stimulus efforts. If that occurred, we would likely see all assets continue to go higher and higher.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News

Latest Crypto News & Analysis

Editors’ Picks

Bitcoin bulls ignore China warning amid a potential rally to $45,000

Bitcoin has kicked off the August month on the right footing, looking to extend the previous week’s 15% gains amid favorable fundamental and technical catalysts. Looking at the daily chart, the BTC price is gathering pace to initiate a fresh upswing towards the horizontal 200-Daily Moving Average (DMA) at $44,750.

More Bitcoin News

Dogecoin price preps up for a rally towards $0.30

Dogecoin price is jumping this Sunday, displaying a solid start to August, as a fresh buying wave grips the crypto market. DOGE price confirms a triangle breakout on the 4H chart. The bulls target $0.30 amid the renewed upside momentum.

More Dogecoin News

Shiba Inu Price Prediction: Tide turning in favor of SHIB bulls, as $0.00000750 beckons

Amid an upbeat momentum seen across the crypto board, Shiba Inu is looking to extend Saturday’s upswing from near the $0.00000590 support area. The focus remains on Sunday’s close to confirming a falling wedge breakout on the 1D chart.

More Shiba Inu News

XRP price eyes a sustained break above 200-DMA to recapture $1.00

XRP price pauses its recent uptrend, consolidating in a familiar range for the fourth day in a row, as the digital asset bides time to resume the next leg higher. Only a daily closing above the 200-DMA could open gates for a rally towards $1.00. 

More Ripple News


Bitcoin Weekly Forecast: Markets revert to mean, but BTC price remains indecisive

Bitcoin price shows considerable strength after springing from the recent crashes. Still, it is uncertain whether the current bullish impulse will morph into a new uptrend or lead to a more profound decline.

Read the weekly forecast