Is the Increasing US Debt A Stage Setter for Bitcoin? – A Realistic Take
November 3rd, 2019
The United States national debt has now crossed $23 Trillion. Furthermore, debt per the United States citizen sums up to $69, 724. In a way, central banks are paving way for the smooth transition of Bitcoin into traditional finance.
While traditional finance enjoys the trust of the major US population, Bitcoin is here to stay. Considering the fact that Bitcoin and other crypto-assets are anti-inflationary and have a controlled supply, it is likely that in the future that Bitcoin continues to map the international market and eventually becomes a better bet than the inflated dollar.
Is Fed Responsible For Growing interest in Bitcoin?
Statistics further reveal that the debt to gross domestic product ratio is 106.65%. As a matter of fact, the debt makes up for $1,000,000 in debt per 1 Bitcoin. Since mid-September, the US Fed has injected U.S. Fed has effectively created hundreds of billions in new money more than Bitcoin’s entire market cap of $165B in a few spans of days.
The purchasing power of the dollar has seen a severe decline over the last century. Per the Bureau of Labor Statistics, $1.00 in January of 1913 had as much purchasing power as $25.67 of today’s dollars. Until the United States can take control of its budget deficits, the dollar is at the risk of experiencing even greater inflation.
However, it is not the case with Bitcoin, unlike the dollar, it has a fixed supply. This implies that the rate at which new Bitcoins are created is controlled by algorithms in the Bitcoin code. The Bitcoin mining rate is stable and predictable which makes the rate of inflation easier to anticipate.
While the objective of QE is to revitalize the economy it can also drive investors to diversify more risk into their portfolios, as they look to maintain the same yield.
“QE would push longer interest rates lower and thus push some investors out the risk curve, i.e., seeking riskier investments to achieve desired returns. One can theorize some of that money would end in Bitcoin, adding upward pressure to prices.”
As the interest rates decline and the supply rises, the domestic currency inflates and loses value. Interestingly, during a trade war, a weaker currency is a welcomed byproduct of QE. Bitcoin enthusiasts believe that it is just another harbinger for the collapse of the financial system.
Will Bitcoin Help Avert A Financial Collapse?
In August, Global Macro Investor Raoul Pal declared a worldwide currency crisis and put up a strong argument for investing in Bitcoin. He further said that while Bitcoin may not be the best bet against macro risk, it will play a large role in the case of a financial collapse.
“I view BTC as an option on the End Game to the current monetary system. No, it is not a good day today macro hedge. It is a macro systemic risk hedge, however. That is very different. It does play a decent role in capital flight too in emerging markets.”
Conclusively, the tilt towards Bitcoin as a safe haven is on a steady rise. Whether or not it replaces the dollar, it is sure to prevent an economic breakdown in the future.