Negotiations for a second Covid-19 stimulus package for the citizens of the United States have been ongoing for months. But on Tuesday, President Donald Trump shocked the markets by suddenly announcing that he was delaying the talks until after the 2020 presidential election. The prices of bitcoin, altcoins and mainstream assets fell shortly after.
“Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19,” Trump, who has been treated for Covid-19 with a drug that can have serious psychiatric side effects, said in a tweet. “We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country.”
No further stimulus package negotiations will take place before the election, Trump said in subsequent tweets, while remaining exuberantly optimistic about his political prospects: “Immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
The market did not share his enthusiasm: Stocks fell noticeably and bitcoin dropped about $200 before bouncing slightly. Its price at the time of writing (2.30 am in Hong Kong) was $10,565.
Bitcoin’s drop following the news appears to support the view that it continues to be correlated with traditional markets.
UK derivatives ban
Meanwhile, putting further downward pressure on the crypto market, the UK’s financial regulator has banned the sale of crypto-related derivatives to retail consumers, saying the underlying assets had “no reliable basis for valuation,” the Financial Times reports.
After concluding a consultation on the rules governing these financial instruments – which include contracts for difference and exchange traded notes linked to popular cryptocurrencies such as bitcoin – the Financial Conduct Authority said these products were “ill-suited for retail consumers due to the harm they pose.”
As well as the valuation concerns, the watchdog cited “extreme volatility” in the price of these assets and the prevalence of market abuse and financial crime such as cyber theft. It also said there was a lack of understanding of the products among consumers, said the FT.
Bitcoin holds above key support
The good news today, Crypto YouTuber Lark Davis points out, is that bitcoin has so far held strong above the psychologically important $10,000 support level.
Davis tweeted: “Covid rising in Europe, Trump cancels stimulus, stocks falling, election looming, Bitmex indicted, kucoin hacked, UK bans #crypto derivatives…… meanwhile #bitcoin is still maintaining its record run above $10,000!”