Trump's Economic Bill May Temporarily Drop Bitcoin Price 18%

President Donald Trump's newly passed economic bill, which includes tax cuts and a higher debt ceiling, is expected to significantly impact the U.S. Treasury's borrowing activities. This could potentially drain liquidity from risk assets like Bitcoin, leading to a temporary drop in its price. Arthur Hayes, a prominent figure in the crypto community, believes that once the bill is signed into law, Bitcoin could briefly fall to $90,000 from its recent high of over $110,000. This drop is anticipated due to the Treasury's need to replenish its cash reserves, which could temporarily suck capital out of the system and create short-term downward pressure on crypto assets.

Hayes views this potential price drop as a pause rather than a reversal of the ongoing bull cycle. He maintains that the macroeconomic forces driving Bitcoin's price, such as money printing and declining trust in traditional finance, remain intact. According to Hayes, these factors continue to support the case for Bitcoin potentially reaching $1 million by the end of the decade. He advises investors to prepare for short-term volatility but remains convinced of Bitcoin's long-term strength.

Beyond the immediate market mechanics, Hayes raises a broader issue: the growing convergence of crypto and U.S. fiscal policy. He suggests that stablecoins could become key tools for the government, used by large banks to absorb Treasury bills as part of a strategy to manage national debt. In this scenario, control over stablecoin issuance may shift from private firms to regulated financial institutions. This shift could have significant implications for the crypto market, as stablecoins play a crucial role in facilitating transactions and providing liquidity.

The bill, which has been dubbed the "big, beautiful bill," includes a variety of measures that could affect household finances for years to come. Among the most notable provisions are permanent tax cuts, which are set to benefit the wealthiest households the most. The budget makes permanent the 2017 tax cuts implemented during the first Trump administration, which were set to expire by the end of the year. The wealthiest households will benefit most with an average $12,044 in savings per year; middle-income families would see average annual savings of $500 to $1,000 per year; while the lowest-income households would lose an average of $1,559 annually.

The bill also includes significant cuts to social programs, including $930 billion in cuts over the next 10 years to Medicaid, Medicare, and the Affordable Care Act (ACA). These cuts are expected to result in an estimated 11.8 million more people being uninsured by 2034. Additionally, the bill tightens eligibility for food assistance through the Supplemental Nutrition Assistance Program (SNAP) and expands work requirements, shifting costs to states.

The bill's impact on the national debt and the economy is also a cause for concern. The Tax Foundation projects that the budget will temporarily boost economic growth by encouraging business investment through tax cuts. However, this comes at a steep price: the national debt, which currently stands at more than $36 trillion, would increase by an additional $3 trillion over the next decade as a result of the bill. The biggest costs in the budget are taxes, followed by $1 trillion allocated for defense, as well as border security and immigration enforcement.

The bill's rollbacks of green energy incentives could also have significant consequences. Estimates suggest that these rollbacks could hike energy costs for consumers, slow clean energy development, and increase greenhouse gas emissions. Additionally, the bill includes a $5 trillion increase to the debt ceiling, which will prevent the U.S. from running out of money to meet its debt obligations.

The potential impact of the bill on Bitcoin is a topic of debate among analysts. Some argue that the bill's provisions, particularly the tax cuts and increased national debt, could lead to inflation and a devaluation of the U.S. dollar. This, in turn, could make Bitcoin a more attractive investment option for those looking to hedge against inflation. However, others point out that the bill's cuts to social programs and potential negative impact on the economy could lead to a decrease in consumer spending and investment, which could negatively affect the price of Bitcoin.