The US national debt has reached a new record, already exceeding $38.5 trillion. This has a direct impact on financial markets, including Bitcoin (BTC) and cryptocurrencies, as there will be increased focus on a country’s monetary policy and interest rates.
Of the total debt, more than 70% is from domestic lenders and the rest from foreign creditors such as Japan, China and the UK.
The figures suggest a debt-to-GDP ratio of more than 120%, a result of decades of fiscal spending on infrastructure, military and social programs, in addition to the impact of the coronavirus pandemic.
Looking objectively, It’s as if every American owed $120 for every $100 of annual income..
The situation becomes even more alarming when you consider that annual interest alone already exceeds $1 trillion, which is larger than the budget allocated to national defense.
What do Bitcoin and cryptocurrencies have to do with the US debt?
The fact that the debt of the world’s major financial countries has exceeded a historical maximum It also affects Bitcoin and cryptocurrencies.
In this scenario, governments often ask central banks to lower interest rates to keep debt service costs low.
For this reason, Donald Trump has made several requests to the US Federal Reserve (FED) since his second term as president. Lower interest rates to below 1%.
As CriptoNoticias explained, rate cuts are typically made in favor of assets considered to be risky, such as BTC and cryptocurrencies.
Every time a reduction in the exchange rate is announced, borrowing costs become cheaper and Investors place their holdings in this “riskier” asset class with the goal of maximizing profits.
“There is a growing recognition that the dollar is losing some of its haven, especially in cases of unstable monetary policy or questions about the US debt. In that context, assets such as gold and Bitcoin are becoming increasingly attractive as safe-haven alternatives,” María Agustina Pati, spokesperson for online trading platform Exness, said in a conversation with CriptoNoticias.
He added that BTC stands out in this context for its “main advantages: programmed scarcity, ease of transfer at a global level, independence from governments and central banks, and the potential for long-term value appreciation.”
