Bitcoin (BTC) may be under pressure to permanently liquidate $ 40,000 in a US dollar account, as US President Joe Biden’s new $ 6 trillion federal spending proposal was unveiled.
On May 28, the President of the United States will announce an ambitious fiscal policy, the largest since World War II, to secure investment in major infrastructure, education and health projects, The New York Times reported on May 27.
Biden is said to want the federal government to spend $ 6 trillion by 2022. He also plans to increase total spending to $ 8.2 trillion by 2031.
Biden previously offered large tax increases to wealthy companies and individuals in America to fund its huge spending program. But the newspaper said the government will need at least 2030 to reduce the budget deficit. This means that the United States will face a huge debt burden because it borrows money to finance Biden’s reference proposal.
The US federal budget deficit increased from $ 4.17 trillion in January 2020 to $ 7.92 trillion in May 2020. Source: FRED
According to recent history, this scenario is ideal bullish support for Bitcoin. Decentralized cryptocurrency increased by 1.582% from a low level of $ 3,858 in March 2020, when the US government increased spending to unprecedented levels to deal with the coronavirus pandemic.
On the other hand, the US Dollar Strength Index (DXY), which measures the strength of the dollar against a basket of major foreign currencies, fell as much as 13.38% after peaking in March 2020 in the midst of the global market crash.
DXY continues to decline despite a rebound in 2021. Source: TradingView.
Meanwhile, Anthony “Pomp” Pompigliano, a popular bitcoin lobbyist and founder of Pomp Investments, expects the dollar to weaken further.
“The government proposes to push our country to even more debt while reducing the value of the currency,” Pompigliano said. “Historians will write that the government was in a hurry to destroy the world’s reserve currency because its citizens encouraged it.”
Other analysts were also quick to offer Bitcoin – with a steady supply – as a means of the steep US debt curve.
Bitcoin returns $ 40,000
New York Times coverage increased tensions during the US trading session early in the morning as DXY fell a modest 0.01% at the opening in New York, while Bitcoin recovered $ 40,000.
Bitcoin exceeds $ 40.00 early in the morning during New York trading session. Source: TradingView
The Bitcoin / dollar exchange rate tested its 200-day SMA (orange wave in the chart above), which is around $ 40,756 for the breakout to move up.
If this happens, the pair will try to close above the 20-day exponential moving average (green wave) – around $ 43,655 – to confirm their bullish sentiment in the short term.