One sentence from Ray Dalio's book, The Changing World Order: “Depreciation of currencies usually occurs quite suddenly during a debt crisis.” This sentence is now more powerful than it was written for the first time by the billionaire hedge fund manager in 2021. The reason is simple: the United States may be moving towards this situation.
In 2024, the United States budget deficit exceeded $6 trillion. Despite the efforts of Elon Mask, the head of the former Government Efficiency Department (DOGE), to cut federal spending, only $18 billion was cut, well below his commitment of $2 trillion. Interest rates remained at 4.5 per cent, and the Fed was concerned about the impact of trade wars on inflation. At present, the return on 10-year sovereign debt still hovers over 4.35 per cent.
Let us be frank: the United States debt spiral is deepening. Even more worrying is its potential catalyst, a bill that was passed through the House of Representatives on 22 May and is awaiting Senate approval.
The Great Beauty Act will drive inflation to increase. Since the beginning of May, the bill, which contains more than 1,100 pages and highlights of past Republican policies, has become the headlines and has broken friendship among celebrities. It extended tax cuts in 2017, removed former President Biden ' s green energy incentives, tightened eligibility requirements for Medicaid and Supplementary Nutrition Assistance, and authorized a massive expansion of immigration law enforcement and raised the debt ceiling by $5 trillion.
According to data from the Office of the Non-Party Congress Budget, the bill would reduce federal revenues by $3.67 trillion over a decade, while expenditures would be reduced by only $1.25 trillion. This represents a net increase of $2.4 trillion, making even more alarming the debt already at almost $37 trillion. Another non-partisan predictor body, the Responsible Federal Budget Commission, noted that the cost of the bill could rise to $3 trillion in 10 years, if interest payments were taken into account, and to $5 trillion if temporary tax cuts became permanent.
As some supporters believe that tax cuts will stimulate the economy and “self-repay”, Harvard economist Kenneth Rogoff warned that “CBO ratings are a distraction. When you ignore the burning forest, you argue about branches and leaves."
The United States could not escape its debt through growth. Some believe that the United States will magically “learn out” the problem. However, as Sina, co-founder of 21st Capital, mentioned on X, “to get out of this debt without cutting expenditures or increasing taxes, the US needs to grow real GDP by more than 20% per year for a decade.” This scenario is unrealistic given that real GDP growth in the first quarter of 2025 is -0.3%, and the US Federal Reserve is estimated at 3.8% in the second quarter.
In this context, the role of bitcoin as a monetary policy insurance became particularly important. The real value of nominal national debt and cash would be eroded if, or when, the United States chose to exit its debt through inflation. Depressed interest rates and mandatory bond purchases may further facilitate the entry of real rates of return into negative areas.
Bitcoin was designed to resist such results. By virtue of its fixed supply and its independence from government monetary policy, Bitcoin provides a haven that cannot be provided by statutory currency: protection from financial oppression and currency devaluation. As noted by Bitwise analysts, the scarcity and resilience of bitcoin gives it unique advantages in times of financial instability.
However, not all bitcoin exposures are equal. In crisis situations, the risk of trusteeship is high when Governments can justify financial repression in the name of “economic stability”. ETF and other hosting services may not be able to fulfil their requests for redemption. Real protection comes from self-custody, cold storage, private keys and complete control.