I recently noticed an interesting pattern: when governments start distributing incentives and lowering taxes, crypto usually grows. And when they cut back on spending — it declines. Turns out, this is not a coincidence but a direct influence of what economists call fiscal policy.

It's actually quite simple. Fiscal policy is when the government influences the economy through taxes and budget expenditures. It sounds boring, but for crypto, it has real significance. When the government injects money into the economy (expansionary policy), people get more disposable income and start looking for where to invest it. Cryptocurrencies often become one of the options.

Recall the pandemic. Governments of different countries distributed aid to citizens — this was expansionary fiscal policy in action. Some of that money went into Bitcoin and altcoins, helping to fuel the crypto bull run of that period. People simply had more available funds than usual.

On the other hand, when the government decides to fight inflation by raising taxes or cutting spending (contractionary fiscal policy), people have less money in their pockets. They start saving, avoid risky investments, including crypto. Demand drops, and prices follow suit.

Interestingly, fiscal policy works not only in the short term. Long-term investments by the government in infrastructure, education, technology — all create a favorable environment for the development of blockchain ecosystems and crypto projects. Countries that actively invest in digital infrastructure often become centers of crypto activity.

So if you want to understand why crypto is rising or falling, look at the decisions of central banks and governments. Fiscal policy is one of the main drivers that traders often underestimate. It’s not magic, just economics: more money in the system = more demand for alternative assets, less money = the opposite. Keep this in mind when planning your positions.