The Congressional Budget Office (CBO) of the United States has issued a warning about the country’s increasing national debt. Experts in the industry are discussing the use of Bitcoin as a hedge against the decline of the US Dollar.
The US government has expressed concerns about the impact of the nation’s growing debt on the stability of the Dollar, particularly in light of ongoing de-dollarization efforts led by the BRICS alliance. This has sparked speculation about whether investors will turn to Bitcoin as a safe haven to protect against the potential collapse of the Dollar.
The CBO’s recently released long-term budget outlook highlights that if spending remains constant, the budget deficit will significantly increase relative to the Gross Domestic Product (GDP) over the next three decades. The CBO also warns that inaction could heighten the risk of a fiscal crisis, which would jeopardize the stability of the Dollar.
According to the report, the US federal debt reached $26.2 trillion, equivalent to 97% of GDP, by the end of 2023. The CBO predicts that this ratio will continue to rise, surpassing the previous record of 116% set during World War II by 2029. If current trends persist, the CBO projects that the ratio could reach as high as 166% by 2054.
CBO Director Phillip Swagel, in an interview with the Financial Times, expressed concerns about the potential dangers the US government faces with its currency. He drew a parallel to the economic situation of the UK in 2022 when then-Prime Minister Liz Truss proposed economic changes that ultimately led to the devaluation of the British pound against the Dollar. Swagel suggests that a similar collapse could befall the US government if it ignores the debt issue. The consequences for the world’s reserve currency, the Dollar, could be significantly worse.
Given the concerns raised by Swagel and the CBO, the possibility of Bitcoin being used as a tool to combat the decline of the Dollar adds another layer to the discussion. Notable figures like 2024 US Presidential Candidate Robert F. Kennedy Jr. have advocated for the use of Bitcoin as a hedge against inflation. Kennedy believes Bitcoin is the best defense against inflation because it removes control from the government and the monopolistic banking system, which he claims uses money printing to enrich billionaires at the expense of ordinary Americans.
As of the time of writing, Bitcoin’s price has dropped by 2% in the last 24 hours and is trading at $69,960. Its market capitalization stands at $1.3 billion, with a 24-hour trading volume of $31 billion. The movement of the cryptocurrency suggests that it could serve as a useful tool for investors looking to hedge against the US Dollar. However, whether this will hold up in the long term is still a subject of debate.