The U.S. economic recovery looks increasingly precarious as the leisure and hospitality industries face job declines. The Delta variant may reverse the fragile economic rebound if it continues to disrupt economic activity. El Salvador will officially adopt Bitcoin as legal tender on September 7th, becoming the first country to do so and paving the way for other countries to follow suit.
Slowing Economic Recovery Threatens The Fed’s Plan to Reduce Asset Purchases
The U.S. economic recovery is looking increasingly unreliable as the Delta variant continues to impact the economy negatively. The U.S. added 235,000 jobs in August, far below economist predictions of 720,000. Jobless claims reached a post-pandemic low of 340,000 last week, but many sectors experienced declines or slowing growth. Industries such as retail, leisure, and hospitality all experienced declining payrolls. The slowing economic expansion can potentially postpone the Fed’s plans of tapering asset purchases later this year. Congress will likely introduce additional government funding legislation this month to avoid a government shutdown. Additionally, the House remains on pace to vote on the infrastructure bill later this month.
Global Economies Continue Creating Bitcoin Legislation
El Salvador will officially adopt Bitcoin as a legal tender on September 7th. The country has created a $150 million fund to facilitate the conversion of Bitcoin back into dollars for anybody who wishes to exercise that option. El Salvador has also installed Bitcoin ATMs across the country to support Bitcoin access for its citizens. Gary Gensler spoke to the European Parliament about Bitcoin on September 1st to align global powers on cryptocurrency regulation. Gensler remains optimistic about the potential of blockchain technology, noting that “the transformation we're living through right now could be every bit as big as the internet in the 1990s.” However, Gensler remains adamant that increased regulation is required to support the cryptocurrency industry and provide adequate investor protections.
Bitcoin Price Continues To Rally
Bitcoin mining company Marathon Digital Holdings announced an expanded partnership with NYDIG to facilitate financial services for its mining pool, MaraPool. Members of MaraPool will now have access to liquidity, financing, advisory services, and other products to enable new and ongoing mining operations. MaraPool is a U.S.-based mining pool focused on carbon-neutral Bitcoin mining. The partnership is likely to increase the proportion of Bitcoin mining operations that occur in the United States. Bitcoin continued its price rally last week, reaching prices around $52,000. Bitcoin is trading at $52,500 at the time of writing, putting the currency up 21% in the past month.
Despite high and ongoing inflation levels, the United States government is likely to continue large spending measures. The Fed has acknowledged that inflation is far too high, but increased impacts of the Delta variant will make it difficult to proceed with reducing asset repurchases. Additionally, Congress is likely to introduce multiple large spending measures over the coming months. Bitcoin continued its steady price increase ahead of El Salvador’s Bitcoin adoption. The successful introduction of Bitcoin as legal tender could influence the speed of Bitcoin adoption in other Latin American countries.