The cryptocurrency market lit up on Sunday, with cheers on social media as users hoped for further bull runs for bitcoin. and tokens like XRP and DOGE fueled by stimulus checks, following President Donald Trump’s announcement of a tariff dividend for low-income Americans on Truth Social.
But the reality, as Treasury Secretary Scott Bessent later made clear, is more complex.
Bessent explained that the president’s tariff dividends could be paid thanks to the tax cuts planned by his major economic policy project from earlier this year.
“The $2,000 dividend could take many forms and many ways. It could be just the tax cuts that we see in the president’s agenda – no tip tax, no overtime tax, no Social Security tax – deductibility on auto loans,” Bessent told ABC’s This Week when asked about Trump’s social media post.
These indirect measures, as mentioned by Bessent, may not trigger the same immediate increase in bitcoin, altcoins, or consumer spending as direct stimulus checks typically do. That’s because checks provide quick, tangible cash inflows that can quickly boost demand, while tax cuts tend to distribute benefits more gradually.
A bird in the hand is worth two in the bush: the certainty of a direct influx of liquidity generally has a more immediate impact on the market than the uncertain promise of indirect measures.
Bessent’s clarification follows euphoric speculation that the announced dividend would take the form of stimulus checks, drawing parallels with COVID-era payments that were closely linked to unprecedented rallies in cryptocurrencies – particularly altcoins.
This story drove up stock market valuations. Bitcoin rose from around $103,000 to $105,000 on Sunday, extending gains to over $106,500 at one point during Asian hours on Monday.
The leading cryptocurrency has gained 4% over the past 24 hours, with altcoins such as XRP, WLFI, PUMP, UNI and ZEC up 8% to 25%, respectively. The CoinDesk 20 index gained more than 5% to 3,469 points. The rally, however, stopped around 8:00 UTC.
It’s also worth noting that the parallels with 2021 don’t really hold water. At the time, inflation was well below the Federal Reserve’s 2% target and interest rates were near zero, both factors encouraging increased risk-taking and market exuberance. Today, rates are hovering around 4% following recent cuts, and inflation remains at least a percentage point above the Fed’s target.
This raises a crucial question: whether recipients of tariff dividends – whether through direct payments or indirect measures such as tax cuts – will channel these funds into trading cryptocurrencies or choose to hold them instead.
