08/04 update below. This post was originally published on August 03
Donald Trump, the former U.S. president who’s running in this year’s White House race on the Republican ticket, has surprised many with his embrace of bitcoin and crypto this year.
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Trump’s support of bitcoin—a complete flip from 2019 when he railed against crypto—comes after he made millions from a series of crypto-based digital trading card collections and puts him alongside Wall Street giants and Shark Tank billionaire Mark Cuban as a crypto convert.
Now, after Treasury secretary Janet Yellen admitted her fears over the future of the U.S. dollar, Trump has floated the possibility of using bitcoin to pay off the U.S.’s $35 trillion debt pile—which is adding $1 trillion every 100 days and could fuel a bitcoin price boom.
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Former U.S. president Donald Trump has suggested a radical plan for the U.S. to pay off its $35 … [+]
“Crypto is a very interesting thing,” Trump told Fox Business. “Maybe we’ll pay off our $35 trillion dollars, hand them a little crypto check, right? We’ll hand them a little bitcoin and wipe out our $35 trillion.”
Last week, Trump promised to create a “strategic national bitcoin reserve” and predicted bitcoin could eclipse gold’s $16 trillion market capitalization during an appearance at the Bitcoin 2024 conference.
08/04 update: An investment giant has warned the U.S. national debt could spiral higher in coming years due to higher debt payments and the possibility of a U.S. recession.
“There’s finite demand for available capital out there to fund government debt issuance, and the only way you’re going to entice demand for government bonds is through higher rates,” Ryan Kimmel, a macro asset allocation analyst with the $92 billion, bond-focused DoubleLine, told Reuters. “Your interest expense goes up, which requires higher taxes, which then crimps economic growth, which again feeds through into further economic contraction … it’s a vicious spiral.”
While both Democratic Party candidates and Republicans have said they want to reduce deficit spending, the reality of belt-tightening is a difficult pill to swallow.
“While politically challenging, exercising fiscal restraint remains a viable option,” Kimmel said. “A key question is, will politicians act before U.S. debt dynamics unravel into an unsustainable condition for the economy?”
Trump’s new pro-crypto stance puts him starkly at odds with the Biden administration’s and vice president Kamala Harris’ anti-crypto stance. Trump declared support for crypto in late May and began accepting campaign donations in bitcoin and a handful of other cryptocurrencies.
“If we don’t do it, China’s going to do it,” Trump told Fox Business. “China’s going to do it anyway. But if we don’t do it, China’s doing it. China is already doing it, and if we don’t do it, other countries are going to do it. So we might as well be at the forefront.”
China has cracked down on bitcoin and crypto in recent years, banning the trading and mining of crypto—a process in which powerful computers unlock new bitcoin by solving complex mathematical problems—but has also led the way in the development of a crypto-inspired digital currency, sometimes called a central bank digital currency (CBDC).
Last month, crypto entrepreneur Justin Sun predicted China is poised to flip on bitcoin and crypto while crypto investor Brock Pierce said it’s only a matter of time before China reopens its digital doors to crypto.
“Biden’s trying to shut it down … but if we don’t embrace it, it’s going to be embraced by other people. You know, it’s a massive thing already … and if we don’t embrace it, other countries are going to embrace it. Other countries will anyway, but we can be the leader. We might as well be the leader,” Trump said.
Trump’s radical bitcoin plan comes after Tesla billionaire Elon Musk warned the U.S. dollar is heading for “destruction” and the spiraling $35 trillion debt pile could “bankrupt” the U.S.—something some analysts think could push the bitcoin price higher.
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The bitcoin price has dropped back this week—hitting ethereum, XRP, solana and the wider crypto … [+]
U.S. debt interest payments are forecast to hit $870 billion this year, according to a recent analysis by the Congressional Budget Office, after runaway inflation pushed the Federal Reserve to hike interest rates at a never-before-seen clip in the aftermath of huge Covid-era spending and money-printing.
Earlier this year, Bank of America analysts warned the U.S. debt load is about to ramp up to add $1 trillion every 100 days.
“The U.S. national debt is rising by $1 trillion every 100 days,” Michael Hartnett, chief strategist of Bank of America, wrote in a note to clients seen by CNBC, adding it’s “little wonder ‘debt debasement’ trades [such as gold and bitcoin are] closing in on all-time highs.”
