Uncle Sam’s Stimulus and Crypto Boom

78 Pages Posted: 10 Jan 2023 Last revised: 3 Feb 2024

See all articles by Jeremy Bertomeu

Jeremy Bertomeu

Washington University in St. Louis - John M. Olin Business School

Xiumin Martin

Washington University in Saint Louis - Olin School of Business

Sheryl Zhang

Washington University in Saint Louis, John M. Olin Business School

Date Written: January 9, 2023

Abstract

This study examines the impact of government financial assistance during the COVID-19 pandemic on the demand for crypto assets and its effect on the stated goals of stimulus programs. Government lending to small businesses (PPP) significantly increased households’ interest in crypto assets. Using a Bartik instrument, we find that a one standard deviation increase in disbursements is associated with an increase of 0.1 standard deviation crypto-related Google searches. A 100% increase in disbursements is accompanied by a 2% increased number of new wallets, 9% higher trading volume, 23% higher miners’ revenue, and a 1% shift from large to small addresses, suggesting that government assistance increases the demand for cryptos, particularly among new, retail investors. Roughly 8-11% of disbursements are diverted to crypto assets, rendering the aid less effective in maintaining employment. We rationalize these facts in a stylized model where investment in crypto and employment are affected by binding financial frictions during the pandemic.

Keywords: Pay Check Protection, Crypto, Stimulus Program

JEL Classification: D82, D83, G10, G5, G24, G3, K0

Suggested Citation

Bertomeu, Jeremy and Martin, Xiumin and Zhang, Sheryl, Uncle Sam’s Stimulus and Crypto Boom (January 9, 2023). Available at SSRN: https://ssrn.com/abstract=4320431 or http://dx.doi.org/10.2139/ssrn.4320431

Jeremy Bertomeu

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Xiumin Martin (Contact Author)

Washington University in Saint Louis - Olin School of Business ( email )

Saint Louis, MO 63130
United States

Sheryl Zhang

Washington University in Saint Louis, John M. Olin Business School ( email )

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