Uncle Sam’s Stimulus and Crypto Boom
papers.ssrn.com/sol3/papers.cfm?abstract_id=4320431
What Jamie wrote
Didn’t read the entire paper, but the amount of pandemic forgivable loans that ended up going into crypto assets is something we need to understand even better. That was not the intent of the money.
Government lending to small businesses (PPP) significantly increased households’ interest in crypto assets. Using a Bartik instrumental variable for PPP distribution, we find that a one standard deviation increase in PPP disbursement is associated with an increase in crypto-related Google searches. A 100% percent increase in PPP disbursements is also accompanied by a 2% increased number of new wallets, 10% higher trading volume, 23% higher miners’ revenue, and a shift from large to small addresses, suggesting that government assistance increases the demand for cryptos, particularly among new, retail investors. We further find that about 5-14% of PPP loans are diverted to crypto assets, rendering PPP less effective in maintaining employment. Our results are stronger for MSAs with a less educated population, supporting a house money explanation.
No skin in the game.