According to BlockBeats, concerns over the rapid increase in US government debt have been identified as a partial reason for the recent surge in the prices of Bitcoin and gold. Despite this, the US Treasury market remains relatively optimistic about the country's fiscal prospects. The US budget deficit for the fiscal year 2023 has expanded to $1.7 trillion and is expected to reach $2.6 trillion by 2034. Concurrently, US public debt is projected to reach 106% of GDP by 2028, higher than the 97% in the fiscal year 2023. Since 2007, the scale of US debt has soared from $5 trillion to $27 trillion.
The growing US government debt has garnered more attention, with interest payments occupying a larger proportion, sometimes even exceeding defense spending. This deteriorating trend has driven demand for Bitcoin and gold, which are often used as tools to hedge against inflation and the decline in the purchasing power of the dollar. Brad Bechtel, Global Head of Foreign Exchange at Jefferies, stated that concerns about the US debt cycle and the devaluation of legal currency have driven the narrative for Bitcoin and gold, leading investors to allocate more to these assets.
Lawrence H. White, an economics professor at George Mason University, believes that interest in Bitcoin and gold also stems from intensified inflation turbulence. More worryingly, debt and deficits are still rising in times of peace and full employment, which could trigger a larger increase in debt during the next recession. In addition to hedging risks, the rise in Bitcoin prices is also influenced by the launch of new ETFs and the upcoming halving event. Gold, on the other hand, has reached a historic high due to expectations of interest rate cuts by central banks and the demand for diversification of foreign reserves. Despite this, the rapid deterioration of the US fiscal situation remains a major concern for some investors.
Market strategist Michael Hartnett pointed out that the recent highs in gold and tech stocks indicate that the US may have to adopt policies such as yield curve control to prevent a debt crisis. However, Nicholas Colas, co-founder of DataTrek Research, stated that several indicators in the current Treasury market show that bonds have not yet reflected the expected deterioration in fiscal prospects. Investors still regard the dollar as a reserve currency and US bonds as relatively safe assets. If seeking large-scale risk-free assets, the US bond market remains the first choice.
