TL;DR
-
The United States government, like the Lannister family, is widely known always pay his debts. But right now the US has debts it can’t pay off.
-
A solution? Take off more debt to pay off the past debt. (The same way your chaotic best friend keeps taking out new credit cards to pay off his old one).
-
To raise the money needed to pay off this new debt, the government would most likely issue new bonds.
-
These bonds are likely to absorb money that could have previously been put into cryptocurrencies, such as Bitcoin.
-
But hey, a dip in crypto prices to maintain confidence in the US financial system? We’ll take that trade.
Full story
Ok, so you may be hearing a lot of chatter about the US debt ceiling, possible government bond issuance and its effect on crypto.
Here’s what it all means in plain language:
The United States government, like the Lannister family, is widely known always pay his debts.
But right now the US has debts it can’t pay off.
If it defaulted, it could have huge consequences – because until now the US has always been seen as the global financial superpower.
(Default on debt = loss of confidence in the US financial system).
A solution? Take off more debt to pay off the past debt.
(The same way your chaotic best friend keeps taking out new credit cards to pay off his old one).
The only thing standing in the way of this approach is the debt ceiling.
Like the rest of us, the US has a limit on how much it can borrow. The only difference is that the US government sets its own borrowing limit.
This means that if the US wants more money, they can just raise their limit (which is currently at – wait for it – $31.4 trillion. with a T.)
Here’s how this move could affect the crypto market:
To raise the money needed to pay off this new debt, the government would most likely issue new bonds.
Bonds are a kind of I-Owe-You’s from the government, you buy a bond → the government. gets the money and pays you interest over time.
Investors love government bonds because they are perceived as super safe bets.
You put your money in, you earn interest and get back your initial investment at the end.
Bada-bing-bada-boom.
The concern for the crypto market is that these bonds will be too tempting for the broader market, and some of the money that may have been put into cryptocurrencies, such as Bitcoin, will go into bonds instead.
But hey, a dip in crypto prices to maintain confidence in the US financial system?
We’ll take that trade.