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Massive $275 Billion Single-Day US Debt Spike to Boost Crypto Buying?

Last Updated October 4, 2023 12:12 PM
Teuta Franjkovic
Last Updated October 4, 2023 12:12 PM

Key Takeaways

  • US debt hit a record high of $33.44 trillion after rising by $275 billion in a single day.
  • Interest payments are anticipated to increase to 4% of GDP by 2030.
  • These payments would set a new record for the cost of repaying US debt in 2025.

The US Department of Treasury recently boosted  the Nation’s debt by an amount equal to more than half of the whole market capitalization of Bitcoin (BTC) in a single day, amid an impending global financial crisis and the rising national debt of the United States.

The US national debt reached a record-high  of $33.442 trillion after growing by $275 billion in a single day. According to observations made by Samson Mow, CEO of Pixematic and JAN3, in an X post  on October 4. The overall market cap of Bitcoin at the time of publishing was $536.69 billion.

Indeed, as Mow pointed out, the monumental US debt amount is equivalent to about 10 million BTC, “and yet there are still people that are unsure if $27k is a good price to buy,” referring to the value of the leading crypto asset at press time.

Crypto Usually Rises in Uncertain Times

Typically, in uncertain times, cryptocurrencies, particularly Bitcoin and Ethereum, play an increasingly important role. A fiat currency burdened by increased government debt is not the only option available to people. This was clear when the 2008 financial catastrophe brought on the banks fueled cryptocurrency buying activity.

Gold fell from the $1,900-$2,072 range to $1,823 as BTC-USD increased. The economic system is offering more and more alternatives than traditional fiat and assets.

Can Rate-Hike Solve the Problem?

Meanwhile, the Federal Reserve has embarked on a frantic series of interest rate hikes as it wrestles to get run-away inflation under control, hiking rates at levels not seen since before the 2008 global financial crisis.

As a result, the federal government is paying more just for the interest on the national debt, with projections showing those interest costs tripling from just under $400 billion last year to almost $1.2 trillion in 2032, forcing borrowing higher again to cover the higher interest expenses.

Bitcoin advocate Max Keiser recently stated  that “raising rates won’t stop inflation, it’ll stoke higher inflation.”

“The vicious circle is unrelenting. We have entered a death debt spiral,” he said, adding he expects “everything to go to zero against Bitcoin.”

He also added debt is “going parabolic.”

Analysts at Goldman Sachs  predict that in 2025, the cost of financing the U.S.’s mountain of debt will set a new record.

They claimed that the costs associated with the US’s enormous debt load had increased due to the Federal Reserve raising interest rates over the past year.

“We estimate that debt as a share of GDP will rise from 96% to 123% over the next decade, driven primarily by a chronic deficit of around 3%,” the note said.

According to other projections, the national debt-to-GDP ratio will rise even more quickly. The Congressional Budget Office  has predicted that by 2053, the federal debt may account for 181% of GDP.

“Although nominal GDP growth is likely to mostly offset the effect of higher interest costs on the debt-to-GDP ratio, the structural deficit will continue to add to public debt for the foreseeable future,” Goldman analysts concluded.

BTC Price Movement

According to the most current data gathered on October 4, Bitcoin was trading at $27,557 at the time of writing, showing a drop of 0.17% on the day but still a 5% gain over the previous week and a 6.1% increase on its monthly trend.

Bitcoin slightly down

Credit: FinboldRobert Kiyosaki, the best-selling author of the personal finance book “Rich Dad Poor Dad,” is one of them. He recently expressed his opinion  that Bitcoin is still a relatively inexpensive investment for the time being but will not remain so as other people will realize its benefits and rush to acquire it, which will inevitably increase its price.

Be it as it may, the government avoided yet another shutdown when the House of Representatives enacted a funding bill that the Senate later approved. The money will allow the government to continue running for a few more weeks. Additionally, it unintentionally had a bullish effect on Bitcoin.

Before the shutdown scare, Bitcoin rose from $27,010 to over $28,390 on October 2. BTC-USD ended the day at a price of $27,515. More U.S. Treasury bonds will need to be sold in order to fund the government’s increasing spending. As a result, the yield on Treasury bonds rises under increased pressure. Bitcoin is stronger than the U.S. dollar (DXY, UUP), despite both being robust.

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