While a US Debt Default may create significant problems for our economy, it could also put Bitcoin on a path to its next run-up. Hooray!!! The admittedly low-probability, high-impact event of a US debt default would singlehandedly cause Bitcoin to "skyrocket," according to a Standard Chartered analyst, Geoff Kendrick. Theoretically, a default could cause Bitcoin's value to jump by 68%, representing an increase of $20,000 from its current value.
For my Newbs - The US debt ceiling is a limit placed by Congress on the total amount of money the federal government can borrow. Currently, the limit sits at $31.4 trillion, but it is set to expire in July. The US Treasury has warned that it will run out of cash to pay its bills unless the debt ceiling is raised. If the US defaults on its debt, it would result in a catastrophic event that could lead to a global economic disaster. In this situation, the thought is that Bitcoin could be seen as a safe haven asset, and investors may flock to buy the cryptocurrency, thus driving up its value. A US debt default could further boost Bitcoin's credibility as a reliable store of value, further illustrating its usefulness as a hedge against traditional markets.
Another factor that could affect Bitcoin is the impact of the US dollar on the global economy. Inflation and a weakening dollar can cause investors to look for alternative investments, also fueling this dumpster fire. If a US debt default leads to an economic recession, a flight to safety by investors could lead to increasing demand for Bitcoin, again driving its value even higher!
Furthermore, a US debt default would cause significant problems for global financial markets, creating uncertainty and fear about the economy's future. Investors worldwide may see Bitcoin as a refuge beyond the reach of governments and central banks, even further increasing its value. Bitcoin's decentralized nature theoretically makes it resistant to political and economic turmoil, making it attractive to investors looking for a secure investment globally.
As a low-probability, high-impact event, it is nearly impossible to predict if and when something like this may happen. However, it was advised to me to be prepared for any eventuality. Having Bitcoin in your portfolio could prove genius under such dire circumstances. Even though nobody wants to see an economic disaster, investing in Bitcoin may be an intelligent play. In the meantime, you may want to reconnect with your herbal dealer/2.5-star Uber Driver/Cryptocurrency Advisor. He may have been right this whole time.
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