- President Trump directed Congressional allies to stop working toward a coronavirus relief package until after the November 3 election.
- Stocks, which had been inching higher throughout the day, abruptly fell.
- Bitcoin prices saw a correlated drop.
President Trump today instructed Senate Majority Leader Mitch McConnell via Twitter to cut off talks with Congressional lawmakers over a coronavirus relief bill for Americans until after the November 3 general election.
Immediately following the announcement, stocks fell nearly 600 points from their daily high to end the day down 1.34%. The cryptocurrency market cap also dropped in near identical fashion, shedding almost $7 billion in value within two hours. Bitcoin alone dropped $200.
Trump’s about-face comes just three days after he tweeted in support of a coronavirus stimulus bill from Walter Reed Medical Center, where he was receiving treatment for COVID-19 infection.
Indeed, the stock market rose yesterday as a stimulus bill looked within reach, with the Dow gaining 466 points in Monday trading. Those gains have now been erased. While neither crypto markets in general nor Bitcoin in particular received a noticeable bump yesterday, they shared a sharp—if relatively small—drop today.
As financial analyst Mati Greenspan wrote in his Quantum Economics newsletter,
“On super long-term charts, bitcoin has always been somewhat related to the stock markets, behaving as one might expect of a high-risk asset, especially reacting loosely to the addition or removal of stimulus from central banks.
“As we see increased participation from institutional traders, this relationship is becoming ever more apparent on the short-term charts as well.”
Bitcoin to USD for October 6. Image: TradingView
In terms of a stimulus, things were looking good to start the day. Federal Reserve Chairman Jerome Powell warned that American households and businesses needed a vigorous stimulus in order to ward off a sagging economy as the US struggles to turn the corner on the coronavirus pandemic.
“Too little support would lead to a weak recovery, creating unnecessary hardship,” Chairman Powell told economists.
But the Trump administration and Congressional Democrats came to loggerheads on the extent of spending needed. House Democrats rallied to pass a $2.2 trillion spending package last week, having cut $1.3 trillion from a previous proposal. Treasury Secretary Steve Mnuchin, who had been negotiating the deal with House Speaker Nancy Pelosi, proposed $1.6 trillion in new spending.
President Trump, apparently, was unwilling to budge from the number.
Though Trump is spinning it as Democrats’ fault in the hopes of winning election, it’s a tough sell politically as he has to convince Americans that they could do with not just a smaller stimulus, but none at all in the short-term.
Markets have already responded. While Bitcoin has only dropped 1.6%, investors will be keeping close watch. Stock markets closed within two hours of Trump’s tweet, halting losses. Crypto markets, on the other hand, are 24/7, meaning more losses could be in store.
But Greenspan indicated there may not be much further movement for either stocks or Bitcoin. “Big picture though, today’s move is rather insignificant for both assets. The markets are still in a consolidation pattern where we can see volatility rising while price ranges narrow.”