Finance: Explosion of American debt, a golden opportunity for crypto?

Recent data shows that US debt has increased significantly. This is beyond previous forecasts. The crisis situation in American finance is undoubtedly bad news for the country’s economy. However, the crypto industry could benefit from this.

American finance under pressure with $34 trillion in debt!

The United States’ debt has crossed the $34 trillion mark, surpassing previous financial forecasts. It appears that the situation is mainly attributable to decisions by the Trump and Biden administrations.

Analysts attribute this escalation rapid increase in American debt to the financial decisions of these two successive regimes. Choices which were initially aimed at the economic recovery of the United States following the effects of the Covid-19 pandemic.

You should know that the economic slowdown induced by the pandemic has prompted the American authorities to take unprecedented tax measures. This, by injecting funds to support and stimulate the economy.

However, these measures led to inflation which amplified the cost of servicing the State’s debt. At least this is what economist Sung Won Sohn of Loyola Marymount University explains, for whom the United States has been imprudent in its public spending.

From now on, the debt constitutes a veritable financial Everest, which casts a shadow over the American economic landscape. In this context, we wonder what would be the fate of the crypto market, which we envisage a resurgence throughout this new year.

US debt explodes to historic high of $34 trillion

Crypto could benefit from the situation

It must be said that the situation linked to the American debt constitutes a real problem. Not least because foreign investors, once eager to buy American debt, are now withdrawing.

This is the case of China, whose choices in the financial field are linked to its ambitions within the BRICS framework. This is also the case for Japan. Together the two Asian countries have significantly reduced their assets, going from 49% in 2011 to just 30% at the end of 2022.

As Michael Peterson, executive director of the Peterson Foundation, points out, there is an urgent need to act. Especially since the Treasury must borrow an additional $1,000 billion by the end of March 2024.

But in this critical financial situation, the crypto industry could do well. Indeed, an economic crisis linked to the explosion of debt could affect investors. They could then seek alternative financial refuges. A crypto like bitcoin (BTC) has often been presented as a possibility in this area.

Furthermore, if authorities respond to a debt crisis by printing more money to finance their obligations, a devaluation of traditional currencies may occur. Cryptocurrencies, due to their decentralized nature and limited supply, may attract more attention as a means of preserving the value of finances. Which could ultimately have a positive effect on their adoption.

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