The Growing US Debt and Its Impact on Bitcoin Price
In this article, we will delve deeper into the growing US debt and discuss its impact on the price of Bitcoin. The US debt has surpassed the staggering threshold of 33 trillion dollars and has been growing faster than the national Gross Domestic Product (GDP) for almost a decade. This macro-update aims to shed light on the numbers and examine the implications of this development.
The American Debt Crisis
The most pressing issue for the United States at the moment is the rapid growth of its debt relative to the GDP. The problems are not shrinking but rather escalating for the guardian of the world reserve currency.
Just two weeks ago, the national debt of the United States crossed the alarming threshold of 33 trillion dollars, making it approximately 124 times larger than 70 years ago.
Over the past two weeks alone, America added about 450 billion dollars to its national debt, which is roughly 33 percent of the GDP of the Netherlands. This reveals the magnitude of the debt crisis.
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Currently, the debt-to-GDP ratio stands at around 120 percent, slightly below the peak of 135 percent in 2020. Due to this reason alone, it is of paramount importance for America to lower the interest rates imposed by the Federal Reserve as soon as possible.
If the interest rate remains at the current elevated level of 5 percent, the United States would have to pay a 5 percent interest on an increasingly larger portion of the 33 trillion dollars. This would amount to over 1.5 trillion dollars in interest costs per year, surpassing the entire annual cost of the US military.
The Significance for the Bitcoin Price
This phenomenon is the primary reason why the absolute scarcity of Bitcoin, which has a capped supply of 21 million units, is highly attractive to investors. We are currently experiencing a period in which central banks are tightening monetary policy and raising interest rates, but this trend must change in the near future to prevent the US debt problem from spiraling out of control.
The national debt of America is a ticking time bomb, which can only be postponed by accumulating more debt and lowering interest rates.
For the long term, this sets the stage for an ultimate scenario for Bitcoin. Although we may not fully witness it reflected in the price at the moment, when the central bank lowers interest rates again in 2024, when the US gets its own Spot Bitcoin ETF, and when the Bitcoin halving in April 2024 occurs, extraordinary things could happen to the Bitcoin price.
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As the US debt continues to mount and the debt-to-GDP ratio rises, the importance of finding solutions to this dire situation becomes paramount. Bitcoin’s limited supply and independence from central banks make it an appealing investment choice, especially in a climate where debt levels are sky-high. While the impact may not be immediately visible in the Bitcoin price, the long-term prospects for Bitcoin appear promising, given the potentially volatile combination of events on the horizon.