Foreign media reports that the continued expansion of US federal debt is reigniting market interest in Bitcoin and gold. The article argues that persistent fiscal deficits, rising refinancing pressures, and the difficulty in maintaining high interest rates for an extended period are bringing the "dollar depreciation trade" back into investors' focus.
US debt rises to $39.7 trillion
Data from the U.S. Treasury Department's "Debt to the Penny" report shows that federal debt rose to $39.7 trillion last Friday, setting a new record high. The report cites market observers as saying that the U.S. government debt is still increasing at a rate of approximately $7 billion per day.
The article argues that continued debt expansion will reinforce expectations of a "fiscal-led" monetary policy. In other words, fiscal financing needs will increasingly influence the direction of monetary policy. To reduce refinancing pressures, interest rates may find it difficult to maintain excessively high levels for an extended period, and the liquidity environment may therefore shift towards a more relaxed stance.
The recession buffer space is compressed
Apollo's chief economist, Torsten Slok, previously warned that the US debt-to-GDP ratio has exceeded 120%, meaning that if the economy falls into recession, there will be less room for further fiscal expansion. At the same time, the Federal Reserve is unlikely to cut interest rates as drastically as it has in previous recessions, as this could push up inflation and reduce the attractiveness of US Treasury yields.
The article argues that the US government will need to continue issuing more Treasury bonds to cover its deficit. If demand for bonds is insufficient, the pressure on policymakers to maintain stable financing will increase further. In this environment, some funds may continue to flow to assets outside the financial system or relatively independent assets, including Bitcoin and gold.
Bitcoin rises above $65,000
As of press time, Bitcoin was trading above $65,000. Risk asset sentiment improved somewhat after oil prices fell overnight. Ethereum outperformed Bitcoin during the same period, which the article suggests may indicate a resurgence in market interest in altcoins.
However, the article also notes that since its inception, Bitcoin has mostly resembled a highly volatile technology asset rather than a traditionally stable safe-haven asset. Therefore, whether debt expansion will continue to translate into long-term demand for Bitcoin remains to be seen and depends on subsequent changes in the macroeconomic environment and market risk appetite.
- US federal debt: $39.7 trillion
- Market estimates daily increase: approximately $7 billion
- Bitcoin price: Above $65,000
