Bitcoin Seen as Safe Haven as U.S. Debt Surpasses $31 Trillion

Ray Dalio, the founder of Bridgewater Associates, has warned that the U.S. debt could devalue wealth linked to the U.S. dollar. This warning comes as the U.S. debt has surpassed $3 trillion, a milestone that has sparked discussions about the potential impact on the economy and financial markets. Dalio noted that the debt could spiral out of control if the bill is implemented as it is, leading to higher taxes, reduced government spending, or increased money printing. This could erode the value of the U.S. dollar and hurt those who rely on it to preserve their wealth.

Crypto leaders viewed the fiscal chaos as a bullish catalyst for Bitcoin. As a fixed supply digital asset, Bitcoin becomes a relatively better store of value compared to traditional currencies like the U.S. dollar, which have an infinite supply and are printed at will by central banks. In short, Bitcoin, gold, and other scarce commodities would be in demand. Reacting to Dalio’s warning, Bitwise CIO Matt Hougan urged users to ‘buy Bitcoin.’ Raoul Pal of Real Vision also echoed Hougan’s stance, adding that only tech and crypto are better hedges in such a devaluation scenario.

However, Dalio is more inclined towards gold, stating that it’s easier to track gold price moves, especially due to conflicts. But he found it difficult to do the same on the Bitcoin price, concluding that it still acts as a speculative interest. For BlackRock’s Larry Fink, however, Bitcoin is a digital gold. In fact, he warned in April that it could easily replace the U.S. dollar as the world’s reserve currency if the fiscal debt isn’t managed.

Meanwhile, Treasury Secretary Scott Bessent downplayed the debt concerns linked to the spending bill, stating that the U.S. is growing GDP faster than debt, and that trend will continue through the remainder of the President’s term. However, Coinbase analysts warned that the ‘Big Beautiful Bill’ has a $5 trillion increase in the debt limit. As a result, the U.S. Treasury could refill its main cash account or TGA, and squeeze liquidity, dragging risk assets, including Bitcoin.

This TGA replenishment could potentially drain liquidity from the broader market in the short term, posing a notable downside risk for all risk assets. The increasing national debt and the potential impact on the economy and financial markets are complex issues that will continue to be debated by economists and policymakers. As the U.S. national debt continues to grow, it will be important for investors to stay informed and consider the potential implications for their investment portfolios.