Bitcoin’s ‘potentially serious implications’ on future of investment, global finance

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Crypto demand skyrocketed as inflation fears grip the market and governments continue to print more money. It is noteworthy that the US inflation picture remains worrying with the rate recently hitting a 13-year high of 5.4%.

U.S. Debt

Apart from these concerns, the U.S. debt is piling up. In a recent commentary piece, Avik Roy estimated the extent of debt in the US and how Bitcoin adoption can change it. He explained,

“The single largest holder of U.S. debt is the U.S. government.”

The situation is set to worsen, according to Roy. He explained that the Covid-19 stimulus packages in addition to the spending of $4.6 trillion will stress the fiscal figures, inflation, and interest rates. In this context, he said,

“It’s becoming clear that Bitcoin is not merely a passing fad, but a significant innovation with potentially serious implications for the future of investment and global finance.”

He further added that the zero-risk status of low-interest U.S. Treasury Bonds is now unable to indicate the country’s creditworthiness. Since it is a “compounding problem” of the U.S. fiscal and monetary fundamentals. He also said,

“If Bitcoin ever does compete with Treasury bonds as the premier store of wealth in the world that’s a really really big deal, that transforms the entire way the world economy works.”

Gold

But, why isn’t gold enough as a hedge against the deteriorating purchasing power of the country? To this, Roy explained,

“Like gold, bitcoin is divisible, unforgeable, durable, and fungible. But bitcoin also improves upon gold as a form of sound money in several important ways.”

He further explained that bitcoin is “rarer, more portable, secure” than gold. Additionally, bitcoin is a technology that “augments its functionality” over time. And lastly, the decentralized technology can’t be “censored,” he added.

Therefore, Roy’s arguments state that this is a “strategic opportunity” for the U.S. to drive growth by embracing Bitcoin. As he predicts, over the next 10 to 20 years, an increase in bitcoin’s liquidity can replace treasury holdings. Which in turn, can slash the creditworthiness of U.S.

At this moment, it will be also important to note that the U.S. houses around 43% of global crypto hedge fund managers. If institutions continue to bet on Bitcoin, how will America maintain its “economic leadership?” Either way, Roy said,

“The good news is that the American people are no longer destined to go down with the Fed’s sinking ship.”

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