The United States Congressional Budget Office has issued a warning regarding the country’s increasing national debt. Meanwhile, experts in the industry are engaged in discussions about Bitcoin’s potential as a hedge against the decline of the US Dollar.
Concerns have been raised by the US government about the impact of the nation’s escalating debt on the stability of the Dollar, particularly in light of ongoing efforts by the BRICS alliance to reduce dependence on the currency. This has led to speculation about whether investors may turn to Bitcoin (BTC) as a safe haven to protect against the potential collapse of the Dollar.
The recently released long-term budget outlook from the Congressional Budget Office (CBO) highlighted that if spending remains at its current level, the budget deficit will significantly increase in relation to the Gross Domestic Product (GDP) over the next three decades. The CBO also warned that failure to take action could heighten the risk of a fiscal crisis, which would endanger the Dollar.
According to the report, the US federal debt reached $26.2 trillion, accounting for 97% of GDP, by the end of 2023. The CBO projects that this ratio will continue to rise, surpassing the record of 116% set during World War II by 2029. Based on current trends, they predict that it could reach as high as 166% by 2054.
In an interview with the Financial Times, CBO director Phillip Swagel highlighted the dangers that the government faces in relation to its currency. He drew parallels with the economic situation in 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 believes that the US government could face a similar collapse.
Swagel and the CBO warn that ignoring the issue of debt could have even more severe consequences for the world’s reserve currency, the Dollar.
In light of these concerns raised by Swagel and the CBO, the idea of using Bitcoin as a tool to combat the decline of the Dollar adds another layer to the discussion. Prominent figures, such as 2024 US Presidential Candidate Robert F. Kennedy Jr, have recently advocated for Bitcoin as a hedge against inflation.
Expanding on previous reports, Kennedy praised Bitcoin as an ideal asset class for reclaiming control from both the government and the banking sector. He emphasized that Bitcoin is the best hedge against inflation because it removes control from the government and the monopolistic banking system, which utilizes money printing to transfer wealth to a small group of billionaires while impoverishing ordinary Americans.
At the time of writing, Bitcoin is experiencing a 2% decline in its value over the past 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 indicates that it could have a practical application for investors as a hedge against the US Dollar. However, it remains to be seen whether this will hold true in the long term.