The U.S. national debt surpassed $40 trillion for the first time on Aug. 19, the Treasury revealed. The soaring figure is the result of the government spending more than it's earning. U.S. na
The U.S. national debt surpassed $40 trillion for the first time on Aug. 19, the Treasury revealed. The soaring figure is the result of the government spending more than it's earning.
U.S. national debt, Source: Treasury In such a situation, the government tends to print more money. But as the U.S. dollar's supply increases, its purchasing power or value increases.
However, the dollar crisis has implications for the crypto market. Bitcoin (BTC) maximalists have long argued in favor of the debasement trade thesis and claimed that thanks to Bitcoin's limited supply of 21 million coins, it is bound to remain a valuable asset.
As the U.S. debt hit $40 trillion, TheStreet Roundtable asked crypto experts what the development means for Bitcoin investors.
Related: Coinbase CEO makes big Bitcoin prediction amid market rally
Illia Otychenko, lead analyst at the CEX.IO crypto exchange, said the $40 trillion debt milestone is a reminder of a "growing constraint on U.S. policymakers," with net interest payments potentially exceeding $1 trillion this year. In fact, supporting the economy through lower rates or more spending could create new inflation or currency risks, he warned.
"This also makes managing liquidity more complicated, and liquidity is a key driver of Bitcoin in the near term."
He characterized the recent Treasury decision to double its long-term bond buybacks as a move to improve liquidity, which led to the Bitcoin rally.
But he reminded that the $40 trillion milestone is "more of a long-term story than an immediate Bitcoin catalyst."
Though the growing debt burden can strengthen Bitcoin's appeal as a scarce asset outside the traditional financial system, its price still depends on how policymakers manage the debt and what it means for liquidity, he predicted.
Alex Tsepaev is the chief strategy officer of B2PRIME Group, a multi-asset broker and liquidity partner. He also told TheStreet Roundtable that though the $40 trillion milestone strengthens Bitcoin's long-term structural thesis, it isn't sufficient to change its near-term trading dynamics.
Though he acknowledged currency debasement, he favored gold as the "cleaner expression of that trade" for now. In contrast, Bitcoin remains tethered to risk-asset correlations that override its store-of-value narrative when yields spike, he added.
For Bitcoin to emerge as the debasement trade leader, it needs a long-term rally during equity sell-offs on fiscal fears, sovereign Bitcoin funds, or new massive Bitcoin ETFs, he remarked.
"But I don’t see it happening yet," Tsepaev added.
Martin Lee is a market insights lead at DWF Labs, a crypto market maker, liquidity provider, and venture capital firm. He told TheStreet Roundtable that the $40 trillion figure is a round-number milestone, not something that triggers a market event.
What matters is the overarching direction of where real yields are heading, the amount of liquidity, and its implications for the dollar, he added.
BTC/USD, Source: DecibelOn Aug. 20, Bitcoin surpassed the $72,000 price mark for the first time since June 1. It was trading at $72,651 at the time of writing as per Decibel, up 6% in 24 hours.
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