Key Points
- US national debt crossing $35 trillion might boost Bitcoin as an alternative asset.
- Bitcoin proponents believe the cryptocurrency could help manage the US’s fiscal challenges.
The escalating national debt in the United States, now standing at $35 trillion, could potentially fuel interest in Bitcoin (BTC) as an alternative asset. This viewpoint is shared by Rich Rosenblum, co-founder of trading firm GSR.
Bitcoin as a Hedge Against Inflation
Historically, nations and investors had limited options for investing in alternative assets to hedge against potential inflation. Currently, there is an array of alternatives including gold and cryptocurrencies like Bitcoin (BTC), which could help mitigate inflationary pressure.
Rosenblum suggests that the world’s increasing debt, which might be leading to a ‘debt trap’, could be beneficial for Bitcoin. As US national debt continues to rise, the purchasing power of the dollar is declining. Many governments, businesses, and individuals view Bitcoin as a hedge against inflation and currency devaluation due to its decentralized nature, limited supply, and ability to act as a store of value.
However, Rosenblum notes that the rising national debt doesn’t provide a complete picture. High debt levels pose a threat to fiscal policy and economic stability, particularly as the US prepares for the upcoming presidential elections. High debt can hinder the government’s ability to respond to economic downturns or emergencies, and limit fiscal flexibility, potentially increasing borrowing costs. Bitcoin advocates believe these challenges could be addressed with a proper reserve strategy.
Debate Over Using Bitcoin to Offset US Debt
Some Bitcoin proponents argue that if the US government starts acquiring Bitcoin now and holds it for the next 20 years, it could potentially pay off its national debt. They believe that Bitcoin’s price could reach millions of dollars per coin, which could conveniently cover the US national debt.
However, this proposal has been criticized by gold advocate Peter Schiff, who believes it is flawed and misguided. Schiff argues that it’s contradictory to believe that Bitcoin’s price could reach such high levels due to inflation, and that the US government could use the cryptocurrency to settle debt without inflating the USD. Schiff has consistently questioned Bitcoin’s capacity to ‘save the world’, highlighting its vulnerability to geopolitical events and its status as a highly speculative asset rather than a safe haven.
