The U.S. national debt showdown highlights Bitcoin’s potential role if nations default on their huge and growing liabilities, davidzmorris writes. Opinion for The Node newsletter
populists who seem to think defaulting on the U.S. debt would be Incredibly Based. That reality is leading Democrats to try to cut deals with the more restrained Republican factions, including House Speaker Kevin McCarthy , a politically fragile leader who needsIt’s still very unlikely that the U.S. defaults on the national debt. But if it does, the price of bitcoin is going to be far down the list of almost anyone’s concerns.
A default is, again, a remote possibility. But its potential impact is so huge, even that slim chance is already being reflected in markets. The yield on 10-year and 30-year U.S. Treasury bonds is already inching up, reflecting increased risk of holding them. The Dow Jones Industrial Average and bitcoin have both limped downwards over the past two weeks, though other uncertainties in the market make it hard to connect those moves directly to the debt showdown.
Bitcoin’s neutral monetary layer could very well form a significant backstop simply because it is unfettered from national debt risk. But by the same token, U.S. default would accelerate international efforts to decouple from the U.S. dollar as a trade and investment instrument. The dollar’s biggest appeal is its strength and stability, and a default would obviously harm that faith. Saudi Arabia, Russia and China have all made significant recent gestures towards getting the key oil trade off the dollar, but a default could push those efforts from rhetoric closer to reality.
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