A quite interesting development is currently noticeable. Because of the corona pandemic, all taxpayers in the United States received an extra $ 1,200 special payment to their bank account. But it seems that many citizens are taking the opportunity and are ready to invest the money in risky financial assets. A huge increase in the investment by the US government stimulus checks is particularly noticeable at Coinbase, as the CEO shows on the graph. We also take a look at why institutional investors are now investing record amounts, and are targeting Ethereum in particular.
Record high at $ 1,200 deposit on Coinbase
Brian Armstromg, CEO of Coinbase, reported a huge increase in deposits of exactly $ 1,200. This is particularly exciting since the US citizens have received the stimulus check in the same amount.
According to the US government, stimulus check is said to be a one-time payment of $ 1,200. This should apply to all taxpayers with an annual income of up to $ 75,000. That probably affects most people in the United States. There is also an additional $ 500 check for each child.
— Brian Armstrong (@brian_armstrong) April 16, 2020
According to the CEO and as can be seen in the graphic, there were on April 16 a sharp increase in the deposit in the same amount as the US stimulus check.
Typically, about 0.1% of all deposits are made at exactly $ 1,200. The value quadrupled on the said day and rose to 0.4%. An accident? Probably not.
Suspicion that the record-breaking amount of $ 1,200 in deposits could be US stimulus check is confirmed by the announcement by the US Secretary of the Treasury. The minister said the stimulus check package or the aid payment would already be in the account of all US citizens until April 15. In total, around 80 million citizens receive this payment.
Although the money is intended for food, petrol and other vital means, the crypto community suspects that some citizens have paid the money received into their Coinbase account.
You should also consider how many people chose a different amount of deposit than $ 1,200. These cannot be seen in the graphics. So it could be that many more people used the “gifted” money to buy cryptocurrency. In addition, Coinbase is one of the largest exchanges, but you should also consider that some US citizens may have deposited the money on other exchanges.
Does it affect cryptocurrency prices?
Interestingly, the Bitcoin price was still on April 16. about $ 6,650. As of today, the price is around $ 7,250, an increase of 9%. Ethereum saw an even higher increase and growed up by almost 20% (from $ 153 on April 16 to $ 183 as of April 18). Why Ethereum has outperformed Bitcoin so much could be due to the numbers Grayscale presented. More on that in a moment.
State aid seems to be fueling cryptocurrencies. It has long been discussed that all the new money could lead to stronger inflation, if not hyperinflation. That would mean that all prices rise sharply. But that in turn would also mean that people will flee from money in property, plant and equipment, which would fuel the value such as that of stocks. Bitcoin, as the counterpart of current monetary policy, could also benefit greatly from this flood of money.
Institutional investors take the opportunity
The current situation offers investors not only risks, but also opportunities. If the consequences of the pandemic are less negative than expected, the enormous amount of money could catapult stock prices to new record highs.
This opportunity is recognized not only by private individuals in cryptocurrencies, but also by an increasing number of institutional investors. Grayscale, one of the best-known investment companies for digital assets, reported a huge increase in investments. Accordingly, institutions already invested more than $ 500 million in the first quarter of 2020. That is more than 80% of what was invested throughout 2019!
Q1 2020 marks Grayscale’s strongest quarter yet, with >$500 million raised … that’s 83% of total capital raised for ALL of 2019, in just ONE quarter! Read more about the demand trends we witnessed in the first quarter here: https://t.co/TFwqIcAQEA pic.twitter.com/FXygoDT6T5
— Grayscale (@GrayscaleInvest) April 17, 2020
Almost $ 499 million of the more than $ 503.7 million was invested in Bitcoin and Ethereum alone.
This marks Grayscale’s record quarter since the beginning. Bitcoin and Ethereum are still in great demand. The company thus owns 1.7% of the amount of Bitcoin in circulation in the company itself, as well as its fund Bitcoin Trust (GBTC).
The cat is out of the bag!
Ethereum is particularly popular, as the Grayscale numbers show!
From the latest Grayscale report: Ethereum Trust saw $110M in Q1 inflows. This is more than all of its previous inflows combined for the past 2 years ($95.8M).Grayscale Report
This means that more was invested in Ether in a single quarter than in the past two years combined! The Grayscale Ethereum Trust recorded a total investment of US $ 110 million. Bitcoin is still significantly ahead with $ 389 million in Grayscale Bitcoin Trust, but the development of the investment at Ethereum is now growing faster than at Bitcoin. The recent 20% increase could have been just the beginning. It can be assumed that Ethereum will continue to outperform Bitcoin at least in the short term.