Bitcoin prices wobbled Thursday, primarily as it logged a decent retracement move heading into the US session after staying in the negative zone throughout the Asian and European sessions.
The BTC/USD exchange rate climbed by up to 2.59 percent after establishing an intraday low of $17,905 (data from Coinbase) as of around 0700 EST. The early hours of the New York morning session saw the pair jumping to as high as $18,222.
Earlier in the day, the US Labor Department data revealed that unemployment claims rose sharply last week. The outcome proved that the US economy’s attempt to recover from an ongoing global recession slowed drastically, also as the number of COVID-19 infections in the country grew to record-shattering highs.
Analysts and economists anticipate that a fragile economic outlook would accelerate the US Congress’s attempts to pass a fresh fiscal stimulus package to support American households and businesses. Lawmakers have agreed to pass at least $900 billion, but uncertainty remains nevertheless.
“Concerns persist about the potential near-term impact of fiscal relief measures to combat the spike in new virus cases in the U.S. and abroad,” Richard Flynn, managing director at Charles Schwab, told THE WSJ. “The question that is now being asked is, will any further disappointing jobs data add urgency for an additional stimulus package to pass Congress or, will we see negotiations spill over into the first part of 2021.”
Bitcoin tends to react positively to stimulus news. Earlier in March 2020, the flagship cryptocurrency rebounded after logging a 60 percent crash, taking cues from the Federal Reserve’s dovish monetary policies, such as ultralow interest rates and unlimited bond-buying, and the US government’s decision to dispatch a $2.3 trillion fiscal aid.
A near-zero interest rate and infinite debt purchasing facilities crashed the yields offered on the short-term government bonds. Meanwhile, a massive stimulus package oversupplied the economy with the US dollar units, thereby turning its value lower against a basket of foreign currencies.
Bitcoin, which proposes to act as a hedge against inflationary policies, surged by around 400 percent amid the dovish environment.
“The dollar isn’t dropping nearly as fast because the banks taking it from the Fed aren’t loaning it out because they have much tighter restrictions,” said Jacob Canfield, an independent market analyst.
“Still, we’ve got more stimulus on the way, and Bitcoin has proven itself over gold/bonds,” he added.