The United States will reach its vaccine target in June. Tightening monetary policy is bearish for Bitcoin, but the outbreak in India becomes a variable

Wu said author | Rebecca

Editor of this issue | Colin Wu

The United States will reach its vaccination target of 75% in June, and the Federal Reserve has said it will discuss adjusting monetary policy when this goal is reached. Canada has already begun adjusting its monetary policy, and the recent decline in Bitcoin seems to have been a sign of this. However, the outbreak in India and the virus variant may become a variable.

Bitcoin continued to fall, falling below $47,000 in the early morning of the 26th Beijing time. The Federal Reserve has said that when the vaccination rate reaches 75%, it may begin to discuss reducing QE. As vaccination continues to advance, is the day of tightening monetary policy getting closer? But the epidemic in India has begun to break out, and various mutant viruses are rampant. What impact will this have?

1 When will the U.S. COVID-19 vaccine reach 75%?

As of April 18, 25.7% of the U.S. population (more than 85 million people) have been fully vaccinated, and more than 50% of adults have received at least one dose of the COVID-19 vaccine. Ideally, if the United States can maintain its current pace of vaccinating 3 million people per day, the vaccination rate will reach 75% by June.

From a supply-side perspective, the supply of COVID-19 vaccines in the United States far exceeds demand. According to The Washington Post, a recent report released by Duke University's Global Health Innovation Center revealed that by July this year, the United States may stockpile an additional 300 million doses of vaccines, which means that the United States has more vaccines than the entire population. The oversupply situation is in stark contrast to that in many developing countries.

The United States has now opened vaccination to all Americans aged 16 and over. Under the premise that there are sufficient guarantees on the supply side, many young people in the United States still express their unwillingness to be vaccinated. A recent poll by Quinnipiac University in the United States showed that among adults under the age of 35, 36% of respondents said they had no plans to receive the new crown vaccine. Secondly, the Johnson & Johnson vaccine, which was recommended to be suspended due to severe thrombotic reactions, has also increased people's doubts and uncertainties about the safety of the vaccine. The US Centers for Disease Control and Prevention (CDC) also stated that not resuming the injection of the Johnson & Johnson vaccine would delay the time for the United States to achieve its planned immunization goals by 14 days. In the case of voluntary vaccination, this may reduce the speed of vaccination to 75% and herd immunity, and delay economic recovery.

Overall, the current vaccination progress is mixed, and there are still a lot of uncertainties. The goal of reaching a vaccination level of more than 75% is to achieve herd immunity and thus restore the economy. However, as the world's largest economy, the United States has close international trade exchanges. If the epidemic in other countries is not effectively controlled, it will also prolong the global epidemic, which is also a hindrance to the recovery of the U.S. economy.

2 Vaccines, Monetary Policy and Bitcoin

Since 2021, the United States has implemented an extremely loose monetary policy, U.S. Treasury yields have risen, and a large amount of funds in the market have flowed into the cryptocurrency market. The price of Bitcoin has also risen. In the first three months of 2021, the price of Bitcoin has risen by more than 100%, with a return rate of up to 81%.

However, the current U.S. Treasury yield has fallen compared to March, fluctuating back from a high of 1.74%. Since April, the epidemic has gradually improved, various parts of the United States have gradually been unsealed, vaccination rates have increased, and coupled with the Biden administration's stimulus from infrastructure, the economy has gradually improved.

According to Reuters[1], US President Biden will propose to nearly double the capital gains tax rate for the wealthy to 39.6%. Combined with the existing surtax on investment income, this means that the federal tax rate for investors could be as high as 43.4%. Influenced by this, some investors began to choose to sell cryptocurrencies to avoid the heavy taxes they would face in the future. Bitcoin once fell 8%, approaching a one-month low.

Image source: Bloomberg

JPMorgan Chase & Co. and Tallbacken Capital Advisors LLC warned that further losses were possible after the cryptocurrency retreated from its April 14 record high of $64,870.

The Federal Reserve will hold a monetary policy meeting on April 27-28. From the news that the Bank of Canada took the lead in announcing the gradual withdrawal of quantitative easing policy, which pushed up the Canadian dollar, it can be vaguely inferred that the direction of the Federal Reserve's policy may change and it is getting closer to a tight monetary policy.

El-Erian, former co-chief investment officer of IMOC, also said that the Fed needs to find a way to exit the extremely loose monetary policy, and there are risks in delaying the start of this process. If the Fed misses the time window, the market may see an event between the 2013 tapering storm and the 2008 Lehman moment. If the Fed's contractionary monetary policy changes the current liquidity of the market, Bitcoin will be hit to a certain extent in the short and medium term.

3. Virus mutation is a variable

The epidemic in India has deteriorated seriously recently, with nearly 1 million new confirmed cases in three days, reaching the highest point since the outbreak. The Indian Centers for Disease Control said that the outbreak was closely related to a double mutant strain B.1617. But in addition, the Indian government relaxed epidemic prevention restrictions too early, giving people the illusion that the epidemic is almost over. Stopping wearing masks and maintaining social distance are also the fuse that promoted the outbreak.

Dr. Elena Chen of the Broad Institute of MIT and Harvard said: "Once a virus becomes a dominant variant somewhere, it becomes a concern because it means it may soon become a dominant variant somewhere else as well." The longer the epidemic in India lasts, the greater the risk and probability of the mutant virus spreading globally.

There are currently multiple variants in the United States, but vaccines have been proven to be effective against the B.1.1.7 strain from the UK. However, on Thursday, April 22, scientists at the Center for Global Health Research at Texas A&M University said they had discovered a new variant of the coronavirus that showed signs of a more contagious strain and seemed to be resistant to antibodies.

With the large-scale movement of people after the gradual lifting of the lockdown, the reduced wearing rate of masks due to the hot summer, people's laxity in dealing with the epidemic, and the re-emergence and mutation of the epidemic in other countries, the epidemic in the United States may rebound again. If the epidemic is not effectively controlled, the economy will inevitably be affected, thus affecting the adjustment of the Fed's policy.