Exploring Cryptocurrencies as a Solution to the US National Debt
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Could Digital Assets Be the Key to Alleviating the US National Debt?
Recently, former US President Donald Trump suggested that the burgeoning world of cryptocurrencies might provide a novel way to manage the escalating US national debt, which has surpassed $38 trillion. Trump’s remarks have sparked international discussions about the potential of digital currencies, particularly Bitcoin (BTC), as tools for addressing the debt crisis in the United States.
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Could Bitcoin Erase the US National Debt?
During a private gathering, Trump expressed optimism about the future of cryptocurrencies. He proposed the idea that perhaps the US could address its $35 trillion debt through digital currencies. Trump quipped, “I’ll jot down $35 trillion in crypto on a piece of paper, and our debt vanishes. That’s appealing to me.”
This isn’t the first time Trump has hinted at utilizing digital assets to tackle America’s growing debt. He has frequently mentioned that his administration might leverage BTC to “rescue America.”
This raises a crucial question: what would Bitcoin’s value need to be to settle the US’s national debt? Asset manager Fidelity conducted calculations to determine a potential BTC price that could achieve this.
Based on Treasury data and blockchain supply metrics, they found that Bitcoin’s circulating supply, currently at 19.93 million BTC, would need to experience a dramatic increase in value to cover the staggering $38 trillion debt. Mathematically, dividing the US’s $38 trillion debt by the 19.93 million BTC supply suggests Bitcoin would need to skyrocket to $1.9 million per coin. At this price, Bitcoin’s market capitalization would equate to the total US debt.
However, it’s important to note that the US does not possess all 19.93 million BTC. Presently, the US holds approximately 326,373 BTC, roughly 1.6% of the total supply, primarily obtained through criminal investigations. If the US attempted to repay its debt solely with its current BTC holdings, Bitcoin’s price would need to surge exponentially. Specifically, BTC would need to reach $116.5 million per coin, nearly 1000 times its current trading price.
At such a valuation, Bitcoin’s market cap would soar to an astronomical $230 trillion, surpassing the global GDP. Attempting to sell BTC at this inflated price would likely trigger a liquidity crisis and cause a significant crash in the cryptocurrency market.
Institutional Confidence in Bitcoin’s Future
While the prospect of Bitcoin reaching $116.5 million per coin may seem far-fetched, recent trends in institutional BTC accumulation indicate a growing belief in the asset’s potential for further appreciation.
Recent US trading data reveals a notable increase in cryptocurrency transactions since Trump took office. As of the latest data, Bitcoin is trading at $110,052, marking a 0.1% increase over the past 24 hours.
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