The United States Senate rejected the new stimulus proposal on Sep.10, which did not include a new round of $1,200 checks. However, this boosts the chances of a new proposal with individual checks getting approved, and could serve as a catalyst for Bitcoin (BTC).
Why was the stimulus proposal rejected, and why could it be a good thing?
The new proposal, dubbed a “skinny” stimulus bill, was rejected with a 52-47 Senate vote. Republican Senator Rand Paul, along with Senate Democrats, blocked the new package that did not include $300 billion for stimulus checks.
Both Republicans and Democrats rallied for a new round of direct stimulus checks in recent months. When a bill without small business support and individual checks was presented, the Senate rejected it.
There is a high probability that the Senate would approve a bill that includes direct payments by the month’s end. If the bill had gone through with no direct payments, it would have not had much impact on stocks, with which Bitcoin has shown a tight correlation since the March crash.
In May, the data aggregation company Envestnet Yodlee found that many Americans used their stimulus checks to invest in stocks. At the time, Yodlee president Bill Parsons stated:
“There’s clearly a correlation between Covid and people being reengaged with their money.”
Brian Armstrong, the CEO of Coinbase, similarly shared data suggesting individuals were buying Bitcoin with their checks.
The percentage of Bitcoin deposits on Coinbase worth $1,200. Source: Brian Armstrong
The percentage of deposits equal to $1,200 significantly spiked after April from 0.1% to 0.4%, by nearly four-fold.
But if a revised package gets through in the future with individual checks, it could once again put buying pressure on the stock market and the price of Bitcoin.
Bipartisan Policy Center executive Bill Hoagland said the Senate might consider a new proposal by the end of September. He said:
“If the FEMA money is gone, you’re going to cut off even the $300 that’s being made available now. That may be the only spark I see that would energize both Republicans and Democrats to do something, maybe before the end of the month.”
Economists say direct checks are essential
Economists are pushing the government to introduce another round of direct payments due to its effectiveness.
Natalie Foster, the co-chair of the Economic Security Project, said direct payments are the fastest way to provide financial support. Foster told CNBC:
“Direct checks are the most effective, fastest way to support American families. In the last six months, we received one $1,200 payment, which is not enough.”
The Senate is unlikely to pass a proposal unless it includes individual checks and a package for small businesses.
For tech stocks and the price of Bitcoin, the Senate pushing for additional direct payments could become a bullish catalyst.