Will US debt explode? Is the golden age of Bitcoin about to come?
As the US sovereign debt crisis continues to ferment, market attention towards Bitcoin as a new global reserve asset has sharply increased. Against this backdrop, this digital currency may encounter a historic opportunity.
US debt is traditionally viewed as a global "safe-haven" asset. This is because the US is a global power in market economy, democracy, and rule of law. Importantly, the high demand for US debt is also a result of the massive trade deficit the US has (net exporting countries need to reinvest their dollars, and they often choose to invest in US debt).
However, the first hundred days of the Trump administration have made the market recognize reality: the structural issues of America's high deficit and high debt will never be resolved, and the US will have to permanently issue more debt. Not to mention, Trump's problematic trade policies have simultaneously lowered the demand for US debt. Ultimately, the US will need to start buying its own debt, with the Federal Reserve acting as the lender of last resort, as the Bank of Japan and the European Central Bank have done in Japan and Italy.
In this crisis, it seems paradoxical for assets like Bitcoin to return to pre-Trump levels or even reach new highs, yet it is reasonable—markets are digesting the return of currency depreciation. Now, the four major economies of the US, China, Japan, and Europe have already implemented or are about to implement monetary expansion policies. Historically, an excess of liquidity will eventually drive up the prices of scarce assets. Gold has already risen, and Bitcoin should follow suit.
Although there are still uncertainties regarding Bitcoin becoming a global reserve asset, it is undoubtedly the best asymmetric investment choice in the current macro environment.
