Bitcoin climbed above $12,000 early Monday before dipping once more as traders weighed U.S. President Donald Trump’s move to provide emergency aid amid new signs the labor market recovery is stalling.
The oldest and largest cryptocurrency is up 63% on the year.
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Trump announced a series of executive orders over the weekend, including authorizing unemployment payments of about $400 a week, less than the $600 benefit that expired at the end of July. Lawmakers with the opposition Democratic party quickly panned the move as unconstitutional, but economists with Goldman Sachs said the president’s runaround might pressure Congress to quickly approve a stimulus package worth at least $1.5 trillion, according to Yahoo Finance.
The determination to provide additional stimulus – at a time when trillions of dollars have already been pumped into the global financial system by governments and central banks – could feed into bitcoin bulls’ bet that the cryptocurrency will benefit as a hedge against inflation, similar to gold.
“Bitcoin’s digital gold narrative is stronger than ever,” the data firm Messari wrote last week.
Even so, economists warned of emerging trends that could upend those bets: a lagging jobs-market recovery that could put downward pressure on wages, reducing any inflationary impulse from fresh stimulus.
A report Friday from the U.S. Labor Department showed the U.S. unemployment rate improved to 10.2% in July from 11.1% in June and 14.7% in April.
But that rate, still roughly triple where it was at the start of the year, might be as good as it gets, at least in the near term, wrote Scott Anderson, chief economist for Bank of the West, a unit of the French bank BNP Paribas.
“We remain firmly of the view that the surge in unemployment is a wage-crushing event, which will play itself out in the data once the recent huge distortions fade, helping to hold down core inflation,” the economics forecasting firm Pantheon wrote Friday in a report.
Indeed, the economics power-couple Carmen and Vincent Reinhart wrote for the September-October issue of Foreign Affairs that the worst of the coronavirus-induced financial crisis may be yet to come.
“The pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies,” they wrote. “Sovereign defaults in the developing world are also poised to spike. This crisis will follow a path similar to the one the last crisis took, except worse, commensurate with the…