Bitcoin price has jumped over 15% during the last 24 hours, currently trading above $6,700. Here are three main reasons behind the surge:
Congress Discuss Digital Dollar by Fed to Fight Crisis
House Democrats proposed two bills that revolve around the creation of a digital dollar and digital wallets, so that the Federal Reserve (Fed) could transfer digital cash directly to individuals and businesses. The move is meant to support the economy amid the COVID-19 pandemic, as the US is only after China and Italy by the number of confirmed cases.
The draft bills are called “Take Responsibility for Workers and Families Act” and the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act.” According to authors of the legislation, the Fed would use a digital USD and digital wallets to transfer money to “qualified individuals,” which amount $1,000 for minors and $2,000 for adults.
Both draft documents use the same definition for the digital dollar:
The term ‘digital dollar’ shall mean a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).
The law might be supported by Congress, and the Fed wouldn’t mind since it previously admitted that it was thinking about issuing a digital currency.
Fed Pumping Unlimited Cash; Stocks, Bitcoin React
Yesterday, the Fed surprised the market when it announced its unlimited support for the economy. Besides buying more Treasuries and mortgage-backed securities, the central bank would also buy corporate bonds and related exchange-traded funds (ETFs).
Johnny Fine, Goldman Sachs’ head of Investment Grade Bonds told CNBC:
This is unprecedented action by the Fed.
Wow. The Fed will be buying investment grade corp bond #ETFs like presumably $LQD $VCIT $SPIB. These funds have diversification and liquidity but demand for underlying bonds has weakened. This is a whole new world. https://t.co/LflFWLGOiX
— Todd Rosenbluth (@ToddCFRA) March 23, 2020
The Fed will buy corporate bonds under a program called the Secondary Market Corporate Credit Facility.
The Fed’s unlimited quantitative easing boosted stock markets, which encouraged many institutional investors to look through other assets, including Bitcoin.
China Has Almost Beaten COVID; Potential Cure Tested Worldwide
China has reported zero local cases for several days in a row, though the number of imported cases increases. Nevertheless, businesses in many regions are reviving. However, many are skeptical of China’s reporting, and there are concerns that the imported cases might spark another wave.
Another sign of hope is the antimalarial drug called hydroxychloroquine, which was recently touted by US President Donald Trump. The drug, which has been around for over 70 years, has been successfully used against COVID-19 in many hospitals in China, South Korea, and in France.
However, many experts warn that the drug and its predecessor, chloroquine, haven’t been officially approved as a COVID treatment. Moreover, several people got poisoned and even died of overdose by taking chloroquine after Trump’s comments.
While the drug is known to have potentially severe side effects especially when the dosage is ignored, many trials have already started in Europe as it is among few medications that showed impressive results against the new coronavirus.
Do you think Bitcoin can break above $7,000 soon? Share your expectations in the comments section!
Images via Shutterstock, Twitter @ToddCFRA
I publish syndicated news from around the globe to help your crypto trading knowledge.