As concerns mount over the rising U.S. national debt, investors are increasingly flocking to bitcoin and gold as safe-haven assets. Recent data reveals that the national debt has soared to a staggering $39.7 trillion, with the Treasury reporting an increase of approximately $7 billion per day. This rapid accumulation positions U.S. debt as the 16th largest cryptocurrency if it were classified as such, outpacing many privacy coins.
The LondonCryptoClub newsletter highlights this trend as part of the "debasement trade," where investors seek finite assets like gold and bitcoin that typically appreciate in value during times of fiat currency depreciation due to high government debt. The founders of the newsletter remarked, "This scenario of fiscal dominance will ultimately shape Federal Reserve policy," suggesting that interest rates may need to remain artificially low to facilitate refinancing.
Experts have raised alarms about the implications of the national debt, particularly the debt-to-GDP ratio exceeding 120%. Torsten Slok, chief economist at Apollo, noted that this leaves little room for additional government spending in a recession, and limits the Federal Reserve's ability to cut interest rates without worsening inflation and reducing bond yields. He warned, "The U.S. has never faced a recession with such a limited fiscal cushion," indicating that a downturn could lead to prolonged economic distress and heightened interest in assets like bitcoin, which operate largely outside traditional financial systems.
