Why Bitcoin is a Life Raft Amid Rising US Debt | US Crypto News

Welcome to the US Crypto News Morning Briefing—your essential rundown of the most important developments in crypto for the day ahead.

Grab a coffee and read about the implications of aging demographics in the US amid rising debt, its inadvertent impact on the country’s debt, and how all these bode for Bitcoin (BTC).

Crypto News of The Day: US Debt Will Sink Fiat

Bitcoin pioneer Max Keiser recently highlighted rising US debt risk, as indicated in one of the US Crypto News publications.

Raoul Pal, founder of Real Vision, has echoed the sentiment, only differently. He sounded the alarm on the macroeconomic implications of aging demographics and ballooning debt.

The former Goldman Sachs executive points Bitcoin as a “life raft” from the coming storm.

“Over time, due to aging demographics, governments need to borrow more money to support GDP growth to pay interest on the debt… That debases the currency and lowers the denominator, optically making scarce assets more valuable,” Pal wrote in a post.

He argues this dynamic is largely misunderstood but critical to understanding global markets. “It’s all demographics. It always has been,” Raoul Pal added.

The US exemplifies this demographic debt trap. A shrinking working-age population must support a growing number of retirees, pushing government expenditures higher.

The Congressional Budget Office (CBO) projected in February 2024 that US debt would reach 116% of GDP by 2034. If current policies remain unchanged, this is up from just over 100% today.

To sustain such debt levels, governments are increasingly reliant on central banks to inject liquidity through tools like quantitative easing (QE).

Pal highlights how this artificially props up debt markets, with the Fed effectively “printing” money via increased net liquidity.

Alternatively, by nudging banks to absorb more government debt through regulation. The result is a steady debasement of fiat currencies, which Pal estimates as an 8% annual erosion in dollar value.

“At over 100% of GDP in debt there isn’t enough economic cash flow to fund the debt growth so it gets ‘printed’ via Fed Net Liquidity and also forced, via regulation, onto the balance sheet of the banks,” Pal explained.  

Besides Pal, Twenty One Capital’s Jack Mallers also termed Bitcoin a life raft, describing Bitcoin as the exit door against currency debasement.

Pal Says Bitcoin Offsets an 8% Annual Fiat Debasement

According to Raoul Pal, crypto and mainly Bitcoin, is the life raft, offsetting the annual 8% debasement while at the same time gaining value due to adoption effects.

In 2020, he shared a similar sentiment on Real Vision’s blog, at a time when demographic pressures became even more acute post-COVID.

“Bitcoin is the life raft. It’s not just an escape mechanism from the monetary system, but it is a superior version of it. It is the supermassive black hole that absorbs all energy and capital from the traditional system,” read an excerpt in the blog.

Based on his latest post on X (Twitter), his conviction has only strengthened.

Macro analysts Olivier Garret and Pal share Pal’s views. In 2017, he argued that demographics would be the biggest driver of financial markets in the future.

He pointed to Japan as a cautionary tale, featuring an aging population, stagnant productivity, and soaring debt levels forcing endless monetary easing.

“This is How the World Works…When both population and productivity growth fall in conjunction, the long-term trend rate of GDP falls. So, how do you resolve the problem of falling GDP stemming from population growth and productivity? Grow the debt,” Pal stated in a Substack post years ago.

With its fixed 21 million supply, Bitcoin offers a sharp contrast to fiat currency. Its appeal lies not just in scarcity but in its growing global adoption. El Salvador’s 2021 adoption of Bitcoin as legal tender reflects this shift.

Charts of the Day

Byte-Sized Alpha

Here’s a summary of more US crypto news to follow today:

• Despite the SEC’s delays, the probability of an XRP ETF approval by 2025 jumps to 98%, signaling strong investor confidence.
• California Assembly passes AB 1180, authorizing digital asset payments for state fees through a pilot program. AB 1180 positions California as a potential leader in cryptocurrency adoption within state financial systems.
• Trump family’s World Liberty Financial executed a high-profile airdrop, distributing 47 USD1 to each WLFI holder.
• Ripple CEO Brad Garlinghouse denied rumors of a $5 billion offer to acquire Circle and dismissed speculation about a stablecoin merger.
• Bitcoin’s unrealized profits have surged above the +2-standard deviation, signaling potential market exuberance, followed by possible short-term corrections.
• A user lost 100 ETH, worth over $263,500, due to a wallet bug while bridging funds to the Base blockchain. However, the Safe Wallet team and Protofire developers discovered the issue and recovered the ETH hours later.
• Despite a subdued BTC price, Bitcoin ETFs saw $378 million in inflows, strengthening investor confidence.
• NYSE Arca filed a 19b-4 with the SEC for the Truth Social Bitcoin ETF, which aims to offer regulated exposure to Bitcoin. The SEC has 45 days to decide on approval, with a final decision deadline in January 2026, and the odds are favorable due to past approvals.
• SolarBank integrates Bitcoin into its reserve assets to hedge against inflation and enhance financial resilience amid fiat devaluation.
• South Korea’s new president, Lee Jae-myung, promises to allow pension fund investment in Bitcoin and introduce spot Bitcoin ETFs.

Crypto Equities Pre-Market Overview

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