Bitcoin (BTC) may get a boost to finally clear $40,000 at the expense of the United States dollar, as U.S. President Joe Biden’s new $6 trillion federal spending budget proposal is unveiled.
The United States president will announce the massive fiscal policy on Friday, the largest since the Second World War, to ensure investments in major infrastructure, education, and healthcare projects, reported The New York Times on May 27.
Biden reportedly wants the federal government to spend $6 trillion in 2022. He also plans to raise the total spending to $8.2 trillion by 2031.
Biden has earlier proposed significant tax hikes on American’s richest companies and individuals to fund his massive spending program. But in his own words, it would take the government at least until 2030 to shrink its budget deficits. That means the United States would face a monumental debt burden as it borrows money to finance Biden’s record proposal.
The scenario, per recent history, serves as an ideal bullish backstop for Bitcoin. The decentralized cryptocurrency rallied by 1,582% from its $3,858 low in March 2020 as the U.S. government ramped up spending to unprecedented levels to combat the coronavirus.
On the other hand, the U.S. dollar strength index, or DXY, which measures the greenback’s strength against a basket of top foreign currencies, crashed by up to 13.38% after topping out in March 2020 amid the global market crash.
Meanwhile, Anthony “Pomp” Pompliano, a well-renowned Bitcoin lobbyist and investor at Pomp Investments, predicts further declines in dollar bids.
“The government is proposing to push our country further into debt while simultaneously destroying the value of our currency,” Pompliano said. “Historians will write that the government accelerated the destruction of the world reserve currency as the citizens cheered them on.”
Other analysts also jumped in to propose Bitcoin — with its fixed supply — as remedy against a steepening U.S. debt curve.
US President Joe Biden set to announce $6 Trillion budget.
Debt as a % of GDP will rise to highest levels since World War II.
— Bitcoin Archive (@BTC_Archive) May 27, 2021
— PlanB (@100trillionUSD) May 27, 2021
Bitcoin reclaims $40,000
The New York Times’ coverage caused early morning jitters as the DXY fell by a modest 0.01% at the New York opening bell whil Bitcoin reclaimed $40,000.
The BTC/USD exchange rate tested its 200-day simple moving average (200-day SMA; the orange wave in the chart above) — which sits around $40,756 — for a breakout move to the upside.
If achieved, the pair would eye a close above its 20-day exponential moving average (20-day EMA; the green wave) — near $43,655 — to confirm its short-term bullish bias.