Unprecedented fiscal and monetary stimulus, led by the Federal Reserve, sparked a crypto investment boom from the start of the pandemic. With the start of the rate hike, U.S. stocks and the crypto market plummeted. Recently, the U.S. Senate passed a $430 billion anti-inflation bill. If the bill continues to advance, what cascading effects will it have on cryptocurrencies?
The U.S. Senate began on Sunday to pass a $430 billion (422.3 billion euro) climate change, health care and tax bill after U.S. Vice President Kamala Harris voted on Saturday for Democrats to break a tie with Republicans unanimously opposed . The package, known as the Reducing Inflation Act, would designate $430 billion in new spending while raising more than $700 billion in new revenue.
The bill will now go to the Democratic-controlled House of Representatives, where it intends to consider it on Friday, after which President Joe Biden can sign it into law.
The bill involves cutting carbon emissions, lowering drug prices with Medicare and imposing new taxes on corporations and the wealthy. The bill calls for billions of dollars to encourage the production of more electric vehicles and foster clean energy, with substantial incentives for businesses and households to buy electric vehicles and energy-efficient appliances. It also seeks to stimulate new investment in wind and solar energy. In addition, the most popular element of the bill is to allow Medicare, the government’s health insurance program for seniors, to lower costs by negotiating drug prices. Meanwhile, the bill’s tax provisions include a new minimum tax of 15 percent on some companies with annual profits of more than $1 billion, and it aims to close loopholes that the wealthy can use to avoid taxes.
It is worth mentioning that the US Democrats previously announced the climate and health care legislation called the “Reducing Inflation Act”, and there was a lot of debate about the name of this proposed public policy measure. 230 economists sent a letter to the leaders of the U.S. Senate and House of Representatives warning that the proposed policy would actually fuel inflation. The letter emphasizes the urgent need to contain inflationary pressures in the United States, but further points out that the “Inflation Reduction Act of 2022” is a misleading label that could have the exact opposite effect.
Meanwhile, Republicans are unanimously opposed, arguing that the bill will not cut historically high inflation and that the tax could tip the U.S. economy into recession. The size of the bill was cut to about $437 billion from an initial $6 trillion.
230 economists have told House and Senate leaders that proposed climate and health care legislation is not a good idea as the U.S. faces a “dangerous crossroads.” Economists’ letter to House and Senate leaders said the bill would exacerbate, rather than alleviate, many of those problems at a time when the economy is already facing supply-demand imbalances, labor shortages and supply chain disruptions. Its $433 billion in proposed government spending would create immediate inflationary pressures by boosting demand, while supply-side tax hikes would limit supply by dampening investment, draining the private sector of much-needed resources.
It is worth noting that under the pressure of inflation, the Fed’s continuous interest rate hike policy has brought continuous liquidity contraction to the U.S. stock market and the crypto market, and the crypto market generally fell 65% or more from the high point. Although Fed Mester pointed out that the Fed will cut interest rates once inflation falls back close to its 2% target. But it is not clear when the inflation gauge will drop and the impact of the bill’s implementation.
At present, the common behavior of central banks in Europe and the United States is to continue to raise interest rates to curb inflation until inflation falls back to 2%. In the process, some level of recession appears to have been accepted. However, the voice of the market does not seem optimistic. Former US Treasury Secretary Summers also said that inflation is difficult to disappear and the fiscal outlook will deteriorate rapidly. If unemployment doesn’t hit 6%, we’re not out of the woods, and we’ll need a big slowdown to get back to normal.
However, there are voices in the industry that the size of the bill will be reduced from the initial $6 trillion to about $437 billion, and the impact on the market will be reduced. At the same time, since the plan has not yet been implemented, it is more about the impact on the macro economy, and the chain reaction to encryption may not be in the attention of encryption enthusiasts. More crypto investors appear to be bullish on the rise of the crypto market’s independent market.
Historically, a bear market in 2022 has been negative for the digital asset space, analysts wrote in a note. However, after such a sustained period of risk aversion, attention turns to whether this is a bear market relief rally or the beginning of a sustained bullish impulse.
Analysts at cryptocurrency research firm Glassnode said Bitcoin active addresses are completely in “a well-defined descending channel.” They added that network activity “suggests that the inflow of new demand remains low so far.” But at the same time, transaction demand has trended sideways or down in recent weeks, suggesting “only traders and investors are confident” The higher base remains.” In addition, on-chain transaction fees are in a “bear market” range, and a recovery could be a sign of recovery.
Brett Harrison, president of FTX.US, tweeted that the crypto market will recover at a faster rate, and listed three elements to stimulate the market rebound, namely: clear supervision from U.S. regulators; more robust crypto options /Futures market; 3. The US approves spot crypto ETFs. Brett Harrison pointed out that the regulatory clarity of U.S. cryptocurrency exchanges and other digital asset providers will give institutional investors the confidence to bet on crypto assets for the long term; a more robust crypto futures and options market will also help bring in institutional capital, through Provides a capital-effective hedge to dampen volatility and make it easier for companies to gain exposure to crypto assets; while the approval of a spot bitcoin ETF could lead to another bull run, although no such product has yet been approved by the SEC.
Wells Fargo noted that cryptocurrencies have developed into an effective portfolio option. At the same time, more firms are pouring their attention into the crypto market, with job postings for financial giant Morgan Stanley reflecting broad cryptocurrency plans, which are getting more serious after launching a private passive fund in March 2021 treats cryptocurrencies fairly and wants to massively increase their product offerings. The push from these financial giants will benefit the broader development of crypto.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/us-senate-passed-the-430-billion-anti-inflation-bill-where-will-cryptocurrencies-go/
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