The most recent stimulus package will result in another large budget deficit for the United States in 2021. The early signs of abnormal inflation levels are likely to accelerate, as the world continues to reopen large portions of the economy. Bitcoin briefly reached new all-time highs before a pullback to $57,000. Major financial institutions continue exploring ways to offer Bitcoin to their clients.
$1.9 Trillion Stimulus Bill Passed Despite Signs of Economic Recovery
Joe Biden confirmed the passage of a $1.9 trillion stimulus package on Thursday. The bill will include direct payments to qualifying citizens, greater unemployment benefits, and funds to combat COVID-19. Meanwhile, the United States experienced 0.35% inflation in February, representing an annual inflation rate of 4.3%. Globally, the European Central Bank has warned of abnormal inflation levels, and indicated plans to increase the comprehensive bond buying program currently in place. Inflation is likely to persist as the US economy recovers; this past week represented the lowest number of jobless claims since the start of the pandemic. US equities performed well last week, with the S&P 500 gaining 2.45%.
Bitcoin Price Increases as Institutional Investors Continue to Buy In
Bitcoin saw great price appreciation this week, reaching new all-time highs around $62,000. At the time of writing the currency was trading around $57,000, with a market capitalization just over $1 trillion. The amount of bitcoin on exchanges reached a multi-year low, indicating that investors continue to move their bitcoin into long-term storage. GBTC reached a new record low discount of 15% last week, causing the trust to temporarily halt incoming investments. GBTC’s parent company announced a buyback worth $250 million to help stabilize the share value around the NAV. GBTC has also announced its intention of launching a Bitcoin ETF, whenever it receives legal clearance, and has begun the hiring process for this product offering. Last week, JP Morgan filed documents to launch a cryptocurrency exposure vehicle, which includes allocations to MicroStrategy, Square, and PayPal, among others. Goldman Sachs COO, John Waldron, stated that “client demand is rising” for Bitcoin, and the firm will “continue to evaluate” ways to offer exposure to the asset.
Companies Around The World Work To Accelerate Digital Asset Adoption
Norwegian billionaire Kjell Rokker has announced his interest in Bitcoin and dedicated a unit within his holding company to trading the asset. Chinese social media company Meitu bought Bitcoin and other digital assets, citing the currencies’ ability to offer “diversification to holding cash.” PayPal acquired digital asset security company Curv, in an effort to improve and expand the company’s existing cryptocurrency product offerings. Israeli pension fund Altshuler Shaham announced that it bought $100 million worth of GBTC in the second half of 2020.
Inflationary hedges are becoming increasingly desirable as markets begin pricing in significant levels of inflation. An economic recovery driven by an improving vaccine rollout is expected to reopen much of the economy in the coming months. Institutional investors around the world are on a steady march towards Bitcoin adoption, due to client demand and deteriorating faith in most major fiat currencies.