Bitcoin may shine if US debt climbs and inflation spikes

The key takeaways:

• One Big Beautiful Bill by President Trump could add more than $2.4 trillion in debt to the US, speeding up a debt crisis that is brewing and increasing inflation.

• Inflation, and the devaluation and the dollar remain the paths of least resistance for the US economic system. They erode the real value cash and bonds.

• Bitcoins can be a safe haven, but they must be kept in your own custody, because custodial services may not survive an extended period of financial depression.

“Devaluations typically occur fairly abruptly during debt crises.” Here is a quote from Ray Dalio. “The Changing World Order,” It is more powerful today than it was when the billionaire fund manager wrote it first in 2021. There’s good reason for this: The US is likely to be walking right into one.

Elon Musk’s efforts to reduce federal spending failed, as only $180 billion of the promised $2 trillion was cut. Federal Reserve fears the impact of the trade war on inflation, which is why interest rates are still at 4.5%. At the moment, 10-year Treasurys are still yielding above 4.35%.

Be honest, the US debt spiral continues to grow. Its likely catalyst, which passed through the House of Representatives on May 22, is currently pending before the Senate.

Big Beautiful Bill to cause inflation increase

Early May saw the Big Beautiful Bill making headlines, and celebrity bromances breaking. Over 1,100 pages long, this bill combines all the highlights of the past GOP’s policies. These include the extension of tax cuts for 2017, the elimination of green energy incentives from former President Biden, and the tightening of eligibility rules for Medicaid, SNAP, and SNAP. The bill also allows for a significant expansion in immigration enforcement, and increases the debt ceiling to $5 trillion.

Nonpartisan Congressional Budget Office The bill, according to the CBO (Congressional Budget Office), would reduce federal revenues by 3.67 trillion dollars over 10 years while only reducing expenditures by $1.25 trillion. It’s an addition of $2.4 billion to our already staggering debt load of $37 trillion. A nonpartisan group, Committee for a Responsible Federal Budget (CRFB), also said that, when interest is taken into consideration, the bill’s costs could increase to $3 trillion or even $5 trillion if tax cuts are made permanent.

Tax cuts, according to some supporters of the bill, would boost the economy. “pay for themselves.” CBO data shows that even with positive economic impacts, 2017’s tax cuts increased the federal debt by nearly $1.9 trillion in a decade.

What’s happening is more than a billion here or there. Republican Wisconsin senator Ron Johnson said, 

“The CBO score is a distraction. You’re arguing over twigs and leaves when you’re ignoring the forest that’s on fire.”

A spiral of debt and budget deficits has already sapped the US economy and no plausible plan exists to reverse this trend.

US can’t “grow its way out” Debt

Many people believe that the US will appear to be magical “grow its way out” This problem. Sina is the co-founder and CEO of 21st Capital. noted On X

“To grow out of this debt without spending cuts or tax increases, the US would need real GDP growth of 20%+ per year for a decade.”

The US Federal Reserve is concerned that Q1 2025 will show a real GDP decline of -0.3%. estimating Such a growth scenario is unrealistic. 

As Harvard economist Kenneth Rogoff wrote Financial Times projects that deficits for Trump will be greater than 7%, without any black swan events.

The only way to grow is in nominal terms.

Ray Dalio described in his book the four instruments governments have to combat a crisis of debt: austerity and defaults; redistribution; and printing currency. The first three measures are difficult and costly from a political perspective. Printing and devaluation is the fourth option, which has the highest probability. The stimulus is silent, opaque, easy to conceal, and can be easily disguised. This also destroys savers and bondholders as well as anyone who is dependent on fiat. Dalio writes,

“Most people don’t pay enough attention to their currency risks. Most worry about whether their assets are going up or down in value; they rarely worry about whether their currency is going up or down.”

Related: Older investors are risking everything for a crypto-funded retirement

It’s not about your coins, it’s about your keys

This is where Bitcoin enters the picture—not as a speculative trade, but as a monetary insurance policy against the US debt crisis.

The real value of nominal Treasurys will be eroded if and when the US elects to create inflation in order to get out of its debt. Inflation and artificially low interest rates could push the real yields down further.

It is a scam to steal bitcoins resist this outcome. It offers financial freedom and currency debasement, as it is independent of government policy and has a fixed supply. Bonds are not able to match the yield of Bitcoin. Bitwise analysts agree notedBitcoin is unique in its ability to profit from the fiscal uncertainty due to its scarcity. 

Not all Bitcoin exposures are the same. If the government has the ability to justify financial restrictions in a situation of crisis, then they can do so. “economic stability,” The risks associated with custodial services are very high. The ETF or any other service that holds assets may not honor redemptions. Only self-custody and cold storage with private keys or full control can provide true protection.

Rogoff stated it simply:

“US fiscal policy is running off the rails, and there seems to be little political will in either party to fix it until a major crisis occurs.” 

So far, the Republican-controlled Congress hasn’t rejected a single Trump proposal, making the odds of the Big Beautiful Bill becoming law high. The likelihood of an all-out debt crisis is also high. The importance of hard assets under self-custody in this world will increase.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.