The $2.5tn raising of US debt limit is bullish for Bitcoin
The US congress has approved raising the country’s debt limit by another staggering $2.5 trillion to help avert a first-time default.
Both the House of Representatives and the Senate passed the legislation on Wednesday as concerns mount regarding the government’s ability to pay its way in the world.
The bill is now on President Biden’s desk, awaiting his signature.
Let’s just think about this.
The government of the world’s most powerful country – which has the world’s largest economy – is worried about its bills.
Therefore, it has approved upping its debt ceiling by an extra $2,500,000,000,000 before its defaults.
Should Biden sign this, which he is almost certain to do, it will increase the US federal government’s debt limit to $31.4 trillion.
This is a scary amount. But it can only be bullish for Bitcoin.
The state-sponsored excessive printing of the US dollar – the world’s reserve currency for decades – and the ongoing increasing of America’s debt limits, have been a masterclass in the law of unintended consequences.
Printing cash in this way devalues the currency and market confidence is undermined.
Then there is inflation, which has historically been increasing by 3.2 per cent in the States, but which has skyrocketed in recent months. Already-hot US inflation has now accelerated to 6.8per cent in November – the highest in 40 years.
Indeed, everyone now seems to have dropped the description of this bout of inflation as ‘transitory’.
But, on the other hand, you have Bitcoin and other cryptocurrencies.
Here’s the crux: unlike dollars or any other traditional currency, Bitcoin – the world’s largest digital asset – is designed to have a limited supply (21 million), so it can’t be devalued by a government or a central bank distributing too much of it. And, to date, around 90 per cent of Bitcoin has already been mined.
This will all not have gone unnoticed by wealthy crypto retail investors who have been using the recent crypto price dips – which were triggered by a wider risk-off sentiment – as buying opportunities.
Could this explain why so many of these rich traders have been sending out ‘advice warnings’ on social media to their followers to sell crypto when the market has been a bit turbulent?
Those Bitcoin panic-sellers have been practically giving away their cryptocurrencies to wealthy buyers who accumulate, accumulate, accumulate.
This scenario seems particularly likely in the current situation, as they are increasingly worried that their cash, and therefore spending power, is being eroded by soaring inflation.
After the US Congress approved raising the national debt limit by another $2.5 trillion, many crypto industry figureheads took to social media on why it’s a bullish move for Bitcoin.
Tyler Winklevoss, Gemini co-founder and long-time crypto advocate, said the Senate’s approval will work as a “$2.5 trillion advertisement for Bitcoin”. Meanwhile Michael Saylor echoed the sentiment, noting, “it would appear that Bitcoin has government support”.
To my mind, for those who remain bearish on Bitcoin and crypto, perhaps they should be more bearish about the cash in their pockets.