Finance: US Debt Explosion – A Golden Opportunity for Cryptocurrencies?

Recent data shows that the US debt has significantly increased, beyond previous forecasts. The crisis situation of the US finance is undoubtedly bad news for the country’s economy. However, the crypto industry could benefit from it.

US Finance Under Pressure with 34,000 Billion Dollars of Debt!

The debt of the United States has crossed the threshold of 34,000 billion dollars, thus surpassing previous financial projections. It seems that the situation is largely attributable to the decisions of the Trump and Biden administrations.

Analysts attribute this rapid escalation of US debt to the decisions of these two successive regimes in finance. Choices that were initially intended to revive the US economy following the effects of the Covid-19 pandemic.

It is worth noting that the economic slowdown induced by the pandemic prompted US authorities to take unprecedented fiscal measures, injecting funds to support and stimulate the economy.

However, these measures have led to inflation, which has amplified the cost of servicing the state’s debt. At least that’s what economist Sung Won Sohn from Loyola Marymount University explains, suggesting that the United States was imprudent in its public spending.

Now, the debt constitutes a veritable financial Everest, casting a shadow over the American economic landscape. In this context, one wonders what the fate of the crypto market will be, which is envisaged to experience a resurgence throughout this new year.

U.S. national debt hits yet another all-time high https://t.co/JALvl18Fes @PressSec @K_JeanPierre U.S. national debt hits yet another all-time high

— Cheryl C (@CherylCavallo) January 3, 2024

Crypto Could Benefit from the Situation

Indeed, the situation related to the US debt is a real problem. Particularly because foreign investors, once eager to buy US debt, are now withdrawing.

This is the case with China, whose financial decisions are linked to its ambitions within BRICS. It is also the case with Japan. Together, the two Asian countries have significantly reduced their holdings, from 49% in 2011 to only 30% at the end of 2022.

As highlighted by Michael Peterson, Managing Director of the Peterson Foundation, there is an urgency to act. Especially since the Treasury needs to borrow an additional 1,000 billion dollars by the end of March 2024.

But in this critical financial situation, the crypto industry could come out on top. Indeed, an economic crisis linked to the explosion of debt could affect investors. They might then look for alternative financial safe havens. A cryptocurrency like Bitcoin (BTC) has often been presented as a possibility in this area.

Moreover, if the authorities react to a debt crisis by printing more money to finance their obligations, a devaluation of traditional currencies could occur. Cryptocurrencies, due to their decentralized nature and limited supply, could attract more attention as a means to preserve the value of finances. Which, in the long term, could have a positive effect on their adoption.