Could the rise in Debt Ceiling be a catalyst for the Crypto Market?
The relationship between the US economy and the Crypto space had always been an adverse one. The US economy had been suffering throughout the pandemic with the relief package not only pushing its money supply and further increasing the National debt while the Crypto Space was enjoying its good times with bitcoin reaching its all-time high $63K on 16 October. So what is currently happening with the US economy and its Debt Ceiling? And with Bitcoin on the high, could this issue further stimulate the Crypto space?
What is happening with the US Debt Ceiling?
The debt ceiling is the US government’s self-imposed limit on how much money it can borrow. The limit was first introduced in 1917, and has been raised a number of times since then. As time has passed, however, the debt ceiling has become a traditional political issue.
The House of Representatives on 28th September approved the legislation to raise the U.S. debt limit, based on a bill passed by the senate. The US Treasury Secretary Janet Yellen also warned that the US federal government could run out of money by October 18 unless Congress acts quickly to raise the debt ceiling. This was seen as a solution to avert the possibility of the first ever national default.
“It would be disastrous for the American economy, for global financial markets, and for millions of families and workers,” stated US Treasury Secretary Janet Yellen on the consequences of not reacting quickly.
The bill was later signed by President Joe Biden and expected to sustain the US economy until December. This would further push the current national debt from $28.4 trillion and is permitted to rise to about $28.8 trillion.
The US National Debt has been growing at an alarming rate, reaching almost 5 times its value from the beginning of the century and the US Debt Ceiling with time has been viewed as a regularity instead of a means for prevention . Recently throughout the pandemic, the US National Debt has grown by over $6 Trillion from the end of Fiscal Year 2019 to Current figure in 2021 but it still hasn’t solved the problem and is the method of raising the national debt and debt ceiling sustainable going to the long run?
Richard Nixon took us off the Gold Standard in 1971 and from that time our currency which used to be a store of value has transformed into the free floating currencies which we know as of today. Our economy from that time onwards is built upon debt and an ever expanding money supply to temporarily extend the life of the economy. In the long run, the free floating fiat money never works as the expanding money supply will result in increasing prices and eventually a hyperinflation. Take the example of Zimbabwe recently who printed their money to a hundred trillion dollars eventually until the money had no value.
There is definitely a huge possibility that a developed country like the US will not end up in the same fate as smaller developing countries like Zimbabwe but is there a long term solution to our ever growing money supply and national debt? Can our national debt ever reduce instead of increase?
Could this issue stimulate the Crypto Market?
The Crypto Space has always been viewed as an escape from the Traditional Banking System due to its decentralized technology which provides less of a connection to the economy. People viewed this growing industry not only as a future investment but also a safe haven from troubled times in the economy.
Just like the 2008 financial crash which spurred the creation of Bitcoin, the pandemic has brought a bigger challenge to the global economy. With the global economy on a standstill, Bitcoin has reached its all time high twice and is growing significantly throughout the year despite the environmental issues. The Crypto Market Cap also saw exponential growth by almost 10x times YoY. Countries which had a high number of Covid cases like Indonesia, India, Brazil and the US itself also showed exponential growth in the trading volumes of its Crypto Space.
The rise in Debt Ceiling not only will increase uncertainties amongst its people who are unsure where the economy is heading but also will significantly increase the money supply flowing in the country. With the Crypto Space on the rise, there is a high possibility that the additional money supply could flow into the various Crypto Assets not only from investors who are looking to make profits but also from people who will take it as a hedge against the economic uncertainties. This all will eventually stimulate the market for existing Crypto Holders and also gather new ones into the community.
We at Nagaya Technologies Pte. Ltd believe that there is enormous benefit that the Crypto Space could bring to many people during this global pandemic we are currently facing. Which is why we created our own Hybrid Crypto Asset called Nagaya that is not only backed by gold for its stability but provides enormous benefits to all the Nagaya holders from the subsidiary projects. To know more regarding Nagaya Technologies and the world’s first hybrid cryptocurrency, you can visit us at nagaya.io
Or you can talk to us at t.me/nagayaofficial