Uncovering Retail Trading in Bitcoin: The Impact of COVID-19 Stimulus Checks

In April 2020, the U.S. government sent economic impact payments (EIPs) directly to households as part of its measures to address the COVID-19 pandemic. We characterize these stimulus checks as a wealth shock for households and examine their effect on retail trading in Bitcoin. We find a significant increase in Bitcoin buy trades of size $1,200, which is the modal EIP amount. We find similar increases in trading for other countries that paid out stimulus checks. We estimate that the EIPs have a significant impact on the U.S. dollar–Bitcoin trading pair, increasing buy volume by 3.8% and the price by 0.6%. We also find that demand for Bitcoin is highly price inelastic compared with the demand for stocks. We suggest the demographic characteristics that make people more resilient to the COVID-19 economic shock—single, computer literate, and educated—are also characteristics of people who are more interested in Bitcoin. This paper was accepted by Bruno Biais, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4790 .