Elon Musk Launches America Party Amid U.S. Debt Concerns, Bitcoin Price Surges 10%

Tesla CEO Elon Musk has announced the formation of a new political party called the "America Party," signaling a shift in his political alignment. Musk, who was previously a supporter of former U.S. president Donald Trump, has fallen out with Trump over the issue of raising the U.S. debt ceiling. Musk's warnings about the spiraling $37 trillion U.S. debt pile were a significant part of his campaign to support Trump's return to the White House last year. However, the recent raising of the U.S. debt ceiling in Trump's signature "one, big, beautiful bill" has led to a rift between the two.

Musk's new political party has sparked speculation about its stance on bitcoin. During this year’s bitcoin conference in Las Vegas, financial commentator Lyn Alden described the U.S. deficit as an unstoppable force, adding almost $2 trillion to the U.S. debt pile in 2024. Musk has cited Trump's increase in the deficit from an already high $2 trillion under Biden to $2.5 trillion as a reason for starting the America Party, warning that this could bankrupt the country. Musk confirmed the rumors by replying to an X user that asked if the America Party would embrace bitcoin, stating, "Fiat is hopeless, so yes." This statement sent the bitcoin price higher, as Musk referred to government-backed currencies known as fiat, rather than asset-backed currencies.

Musk's relationship with bitcoin has been tumultuous, with even small references or mentions of bitcoin and crypto causing prices to fluctuate. Despite abstaining from directly commenting on bitcoin and crypto over the last couple of years, Tesla continues to hold around 10,000 bitcoin on its balance sheet. Musk's support of Trump has coincided with the White House throwing its weight behind bitcoin, leading to speculation that Musk's political party would support bitcoin over the U.S. dollar. An X account called @AmericaPartyX, which is described as a "commentary account," has repeatedly interacted with bitcoin accounts and posted pro-bitcoin messages, fueling expectations that Musk’s political party would support bitcoin.

Last week, X users were captivated by unconfirmed claims that Musk had "liked" a post suggesting he’s "quietly stacking" bitcoin as he rails against the growing U.S. debt pile. However, doubts immediately surfaced that the account appearing to be Musk's didn't have a verification badge, and claims that the account of bitcoin storage company chief executive Seedor, known only as Chris, has previously trolled people with photoshopped images. Musk has expressed his belief that Trump, as well as Republican Party politicians who won last year’s election on a spending-reduction platform, have betrayed voters who want government spending to be reined in.

Fears over the U.S. debt pile have taken hold among investors, with David Friedberg, a host of the influential All In Podcast, declaring, "We are in a fiscal emergency in this country and we’re not addressing it." U.S. debt has skyrocketed in recent years following huge government spending through the Covid-era and lockdowns, with interest rates that were rapidly hiked to rein in inflation adding to the cost of servicing the ballooning $37 trillion U.S. debt pile. This week, Trump’s "one, big, beautiful bill," designed to overhaul the U.S. tax-and-spend landscape and power the country’s next phase of growth while adding an expected $3 trillion of debt and raising the debt ceiling by $5 trillion, was passed by the House of Representatives.

According to James Toledano, chief operating officer at Unity Wallet, the bill's massive fiscal expansion may weaken the dollar and stoke inflation, potentially boosting bitcoin’s 'digital gold' appeal. Lark Davis, a bitcoin and crypto investor, wrote in an emailed note that, "this is exactly why we buy bitcoin." Davis pointed out that bitcoin has historically delivered double-digit gains in the weeks after big spending bills. If bitcoin’s price action were to repeat, this time it would send the price to $150,000. Davis concluded that, "it’s hard money for the win during a debt crisis."