Bitcoin targets $50k – Traders pause profit taking after Biden’s stimulus push
Bitcoin refreshed its all-time high during the early Asian session on Tuesday as traders assessed the prospects of Joe Biden’s latest push to pass his ambitious $1.9 trillion stimulus package.
The Financial Times reported late on Monday that the US president would make official trips outside Washington to present his Crypto Engine expansionary aid proposal to the public. In doing so, he hopes to pressure Congress to conclude negotiations on the stimulus package – especially as Republicans on Capitol Hill fear that the package would drive up the national debt.
But polls show the US public supports receiving direct payments (some of which include a $1,400 benefit for individuals and extra help for the unemployed and parents) – and so Democrats believe growing public pressure would persuade some Republicans to back Biden’s proposal.
Alliance economist sees bitcoin boom
The news has worked as a headwind to the bearish bias that was renewed earlier this week in the bitcoin market (Massive investment planned!). On Monday, the benchmark cryptocurrency fell as much as 5.79 percent amid intensifying profit-taking among day traders.
A day earlier, it had risen exponentially to a new record high of $49,700 (data from Coinbase).
But on Tuesday, bids for the BTC/USD exchange rate climbed as high as $49,872.
Bitcoin is seeing an extended rally towards $50,000. Source: BTCUSD on TradingView.com.
Mohamed A. El Erian, Allianz’s senior economic adviser, viewed the ongoing rally as a „rational bubble“ driven by inflation fears among retail and institutional investors alike.
He cited a spate of recent corporate investment in bitcoin, including Tesla’s $1.5bn capital injection, as having the credibility to inflate the price bubble even higher.
„In addition to massive central bank liquidity injections, there are now massive fiscal injection prospects at the top,“ Erian told CNBC. „So basically investors feel safe riding what appears to be a massive liquidity wave.“
„You’re going to see more companies [add bitcoin to their balance sheets] because you don’t know how else to mitigate the risk. So it’s part of the distortion of the financial markets that we’re seeing in general,“ the analyst said.
Many cryptocurrency analysts now agree that bitcoin would reach a record high above $50,000 this week, although it has failed to close above that target after several attempts.
Ki-Young Ju, chief executive officer at CryptoQuant – a South Korea-based blockchain analytics firm, noted a surge in stablecoins reserves across exchanges. He noted that traders would use the sitting dollar-pegged token supply to buy bitcoin – and other cryptocurrencies.
„This $50k battle is about Coinbase whales(USD) vs. stablecoin whales(USDT),“ the analyst said. „Negative Coinbase premium, but plenty of stablecoins in exchange. Negative premium should be cooled to continue upwards.“