I've noticed that many people in the crypto community don't understand how government policies actually influence asset prices. Let's figure out why fiscal policy is one of the main drivers of the market.

Basically, fiscal policy is a tool through which governments manage taxes and spending. It sounds boring, but it directly affects how much money an ordinary person has in their pocket. And when people have money, they start investing it somewhere.

There are three main approaches. The first is neutral, where the government simply balances income and expenses. Germany in 2019 followed this course, which helped it maintain economic stability. The second approach is stimulative. When the economy is falling, the government lowers taxes and increases spending. People have more money in hand, start spending, investing, and new workers are hired. Remember 2008 — the U.S. government cut taxes, and people started buying more actively. The third approach is restrictive. When inflation is out of control, the government raises taxes and cuts spending to cool down the economy. The U.S. used exactly this strategy in the early 80s.

Now, the most interesting part for crypto investors. When the government pursues a stimulative policy, money floods into the economy. People receive tax breaks, aid packages, and some of this money inevitably goes into cryptocurrencies. Remember how during the COVID-19 pandemic, governments distributed stimulus checks? Many people used that money specifically to invest in crypto. Demand increases, prices go up.

On the other hand, if fiscal policy becomes restrictive, people lose purchasing power. They start saving rather than investing. Demand for cryptocurrencies drops, and prices can fall. The logic is simple: less money in the pocket — less investment in alternative assets.

Why is this important? Because fiscal policy directly affects your income and investment opportunities. If you want to understand where the crypto market is heading, you need to keep an eye on what governments are doing with their budgets. Stimulus measures — a potential bullish trend, spending cuts — a bearish scenario.

By the way, besides influencing crypto, fiscal policy also addresses issues like infrastructure, education, and healthcare. Investments in infrastructure (like China's Belt and Road initiative) stimulate trade and economic growth. Progressive taxation allows countries like Sweden to fund free education and healthcare. But for us, crypto investors, the main thing is understanding how these political decisions reflect on our portfolios.