The correlation between the excess savings and the price of Bitcoin
A recent report from Zero Hedge suggests that US consumers may have already spent most of their excess savings. The timing might correlate with the Bitcoin slowdown: prices for this cryptocurrency saw a huge decrease in November after reaching an all-time high on October 18th.
The sheer number of new data points makes it difficult to tell what’s really going on, but one thing is clear – Americans are spending more than they’re saving these days and if COVID ever comes back around, we’ll be significantly less prepared financially.
The COVID pandemic caused a spike in savings that will be hard to maintain. The chart below shows how it was driven by people not going out much and instead saving their money for the future, when they may need more income.
People experienced an economic boon as part of the COVID pandemic due to many reasons such as increased unemployment rates or decreased spending because of staying at home during this time period. One significant cause is that people didn’t go out very often then so all the extra funds spent on eating food outside, entertainment etc just accumulated into large amounts saved up over time- which would make sense given these “excess savings” won’t last long with higher unemployment rates leading them back down again soon enough.
The stimulus checks that were handed out at the same time Bitcoin was on a bull run led to an increase in savings. In contrast, before COVID’s intervention, people saved $1.3 trillion dollars annually with money going back into their accounts when they got paid each month and not doing anything else for months until it became necessary again – a system that inevitably had them living paycheck-to-paycheck or even worse off as there would be nothing left over after bills are taken care of if something unexpected happened such as an illness striking someone from one household.
Something like this could’ve easily been avoided by just having some extra savings tucked away!
The value of the US’s excess savings has dropped $400 billion since March. As reported by Zero Hedge, this is due to consumers spending at a rate far higher than their earnings for many months now and they will not be able to hold on much longer if it continues like that. The article also mentions the last stimulus check was issued in March which may have contributed towards Bitcoin’s bull run around then too – or so some people think!
It seems that the correlation between Bitcoin’s price and our excess savings might not be just a coincidence. It makes sense, too; when people have more money to spare than they know what to do with at any given time, investing in things like cryptocurrency becomes easier for them!
Although we don’t want this luck of having lots of extra cash run out anytime soon (especially during these tough economic times), it appears as if Bitcoins low prices are related to how much free space you’re able to dedicate towards investments- which is why most analysts attribute BTCs recent sluggishness after its crash back down below $10k USD per coin last year.