Photo by Joshua Sukoff on Unsplash
The White House has made news today by offering a woefully inadequate stimulus package to Democratic House Speaker Nancy Pelosi. The package does not include jobless benefits to the unemployed, thereby neglecting one of the core needs of the American economy. Cryptocurrency markets were still open at the time of the announcement and the markets reacted sharply to the bad news, with Bitcoin falling about 5% at the time of writing.
What On Earth Is Happening Right Now?
Still, things are bullish on the cryptocurrency market front. The future is now visible: a battle for regulation spanning stablecoins and banking regulation between cryptocurrency activists and regulatory pragmatists is shaping up. Both sides have valid arguments, as crypto advocates make the case for a cryptocurrency marketplace that is as unregulated as possible, at least by the government, and push back against efforts to trace the owner of a given asset. The argument here is that for many smart contract operations today, there are no owners. Indeed, the idea that everything should be owned is itself a problematic concept with all of the automation on the market today.
Still, investors are wondering whether this pullback signifies a deeper dip to come and their concern is warranted. Inept regulation could indeed spoil the moment for Bitcoin, but for now at least the conversation seems to be one filled with agreement across previous party lines. Tech-inclined liberals are as interested in free cryptocurrency markets as die-hard capitalist conservatives simply because everyone benefits from cheaper and easier transactions. Security is simply an added bonus.
The argument put forth by Maxine Waters & Co is that banking needs to be regulated. Superficially, this is a perfectly reasonable argument as companies such as Ternio which have moved from the crypto/tech sphere into the banking sphere are certainly bringing a new set of consumer needs and product offerings to the market. However, critics worry that the increased scrutiny will favor established players in the financial space, much as the GDPR seems to have favored tech giants in the European markets because they’re the best at managing data.
Pelosi is perhaps the ally cryptocurrency buffs need, however, having confronted many of these issues during a primary challenge in 2019 from a blockchain enthusiast who put these issues front and center for the Speaker of the House. This story was continued in mid-2020, when Pelosi suggested a “digital dollar” to make stimulus payments.
In related news, AstraZeneca’s COVID-19 vaccine was met with worries that broke the bullish news cycle on the pandemic front. Stimulus may be the only thing remaining to prop up the bull run in the markets and prevent a massive crash from wiping out investors and retirement accounts nationwide if vaccine efforts are met with significant delays.
Bitcoin Is Down 5%. How Worried Should We Be?
Ultimately, the price of Bitcoin fluctuates quite a bit. It didn’t quite have the impetus it needed to conquer $20,000 and plant a foothold north of this psychological barrier, and it has pulled back a bit for what investors refer to as consolidation. The idea is that nothing horrible has happened, but a new bit of risk was introduced and the short-term hope for stimulus for the beleaguered US economy in general suffered a blow today. The stock markets may dip tomorrow when they open, and if this takes place we’re likely to see a bit more battery of the crypto sector.
Despite the short-term worry this situation creates, the market more generally is in extremely bullish territory as Bitcoin hovers less than 10% beneath its all-time high. With the holiday season gearing up and COVID-19 vaccines around the corner, it’s hard not to take the bull case this time too, but we must at least acknowledge that the current market is not invincible. The bull case maintains hope for stimulus and a rapid rollout of a quality vaccine; but the bear case is right behind it with more gridlock in Washington and missteps by big pharma delaying a vaccine.
The question of the moment is this: is the embattled US Government going to be able to rise to face these challenges, or will it fail to act and thus allow the situation to deteriorate further? The vaccine will require major coordination and effective, rapid action by government officials at all levels. The stimulus package needs to shore up unemployment benefits to inject spending money back into the economy, but Republicans worry that this will diminish the availability of labor and are fighting to keep it from happening.
All in all, the situation is still very bullish for markets in general. Stimulus will likely pass soon, as support for a deal is broad and bipartisan, but risks remain and today’s dip was a welcome reminder that, even in bull markets, the price does not always increase. Pelosi’s negotiation tactic, a blockade against the passage of a spending bill on December 11 unless it includes stimulus measures, is likely to be successful as Republicans struggle to control the narrative the Democratic Speaker of the House has been building since April. A failure on the stimulus package could place two Republican Senate seats in Georgia which are slated for a runoff election January 5, 2021 into jeopardy, which would virtually eliminate Republican power at the top levels of the United States Government.
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