Will Rising US Debt Force Investors To Hop On Crypto Bandwagon?

Crypto markets have always been sensitive to debt-related vows. The US national debt reached an all-time high of $34.1 trillion on Wednesday. The increasing debt has put cryptocurrencies in a difficult position. At this junction, investors might choose a decentralized option and invest more in crypto or choose the other road to keep their assets safe avoiding a much more volatile market.

U.S. national debt rises

The US national debt has reached a new all-time high milestone. The overall debt in the world’s biggest economy has now surpassed $34.1 trillion. The number poses a big concern for the country and global recovery and market sentiments in general.

Next year will also see the U.S. fighting another debt battle. The previously signed agreement to raise the U.S. debt ceiling will expire in January 2025. The federal debt of the United States has increased over the past century, from an inflation-adjusted $403 billion in 1923 to $33.17 trillion in 2023. This year, public borrowing is predicted to break all previous records in a few of the world’s biggest economies.

Amid high debt, will the crypto boat fail or sail?

Digital assets depend a lot on market sentiments and how investors perceive risk at a particular moment. The increasing U.S. debt is not only denting market sentiments but is also creating less appetite for riskier assets among investors.

In light of this, should a debt default occur in 2025, the cryptocurrency market may be in jeopardy. High trader liquidations and panic selling in stock markets could cause cryptocurrency values to drop. Early in 2020, the pandemic caused a slowdown in economic activity and a stock market meltdown, which in turn caused a decrease in cryptocurrency prices. If the US defaults, a similar situation might arise again. At least, the prevalent market perception is that a recession could prompt a big selloff and price fall in cryptocurrencies.

However, the risk of central banks indulging in debasement can also push market participants to keep their money away from centralized authorities. In this case, a decentralized crypto appeal can result in a rally for the digital asset market.

Strike founder and CEO Jack Mallers in an interview explained amid the debt equation, government local currencies may depreciate if the present debt trend continues at its current rate. Maller claims that this might force investors into a fiat debasement and cause a collapse in buying power. He feels that in such a scenario, people require a physical asset that is decentralized and that at the moment, Bitcoin is the only option.

Crypto markets, prices today, and outlook

Given that the key players in the market have seen a notable recovery, the current state of cryptocurrency prices points to a very positive move. Not all virtual currencies, meanwhile, have seen gains; for some, the decline seems to be endless. Furthermore, while not particularly significant, Bitcoin’s (BTC) comeback creates the conditions for a potential surge to the $40,000 mark.

However, the future of the digital asset is presumably brighter than it is now. It is projected that the second Bitcoin halving will take place in April 2024. The most well-known cryptocurrencies are anticipated to see an increase in price following the fourth halving, similar to all the previous ones and their effects on price.

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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.