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<a href="https://xpertsstudio.com/bitcoin-researchers-propose-quantum-fix-that-would-not-crowd-out-transactions/” title=”Bitcoin researchers propose quantum fix that would not crowd out transactions”>Bitcoin’s long-term investment narrative is coming back into focus with US federal debt beyond $40 trillion and long-term budget deficits raising sustainability issues, Robbie Mitchnick, global head of digital assets at Blackrock said. Investors would view it alongside other digital currencies as an alternative asset class to sovereign-driven assets, he said.
Mitchnick said in an Aug. 26 interview that, with debt and deficits being such a problem, and with investors concerned about fiat currency’s future purchasing power, the buying pressure of investors may increase around scarce assets, such as Bitcoin and gold. According to U.S. Treasury data, on Aug. 18, the U.S. gross federal debt stood at roughly $40.05 trillion.
There is no proof this recent Bitcoin rally is tied to government borrowing, as it is being driven by other factors: ETF inflows, short covering, the dollar’s weakness, and conditions developing in the Treasury market.
Bitcoin recorded its biggest three-day advance since 2023 in moving from the low-$60,000 range to nearly $80,000 before retreating slightly.
Mitchnick also observed that Bitcoin’s performance during this time, as equities were down and bond markets were fluctuating wildly, is consistent with the narrative that Bitcoin is becoming a new form of store of value, though its correlation with other risk assets is inconsistent and its volatility is higher than gold’s in the short term.
Federal debt has continued to grow rapidly, reaching the $40 trillion mark less than five months after crossing $39 trillion. This includes $32.3 trillion in publicly held debt and an estimated $7.8 trillion in intragovernmental holdings.
Since 2017, when the federal debt was about $19.95 trillion, the national debt has more than doubled under Republicans and Democrats alike.
Some pressure on the fiscal balance is likely to remain. The Congressional Budget Office projects a federal deficit of $1.9 trillion in fiscal 2026 and a deficit of $3.1 trillion (6.7% of GDP) in 2036 under current law. Net interest spending will be about $970 billion in fiscal 2025. Rising interest rates will make it more expensive to refinance.
BlackRock has previously characterized Bitcoin as a scarce and decentralized money with return drivers that may not be correlated to those of equities or bonds. Mitchnick has described Bitcoin as “digital gold”, in contrast to Ethereum’s technology equity focus.
However, rising debt does not automatically lead to fiat currency depreciation or cause a Bitcoin price increase, as economic growth, inflation, interest rates, and Treasury demand also play a role.
Mitchnick also commented on the pending CLARITY Act, stating that increased regulatory clarity could lead to more upside in crypto markets, without necessarily being reflected in investors’ base-case expectations.
The United States already has a relatively developed regulatory framework for Bitcoin following the 2024 approval of a number of spot Bitcoin ETFs, and the legislation may have more immediate implications for DeFi platforms and exchanges or assets with unclear classifications.
Mitchnick’s thesis on Bitcoin depends on United States fiscal conditions. The speed at which Bitcoin’s non-sovereign status as a store of value is adopted by institutions will depend on US federal budget deficits, US Treasury financing plans, long-dated treasury yields, flows into Bitcoin-focused ETFs, and Bitcoin performance in risk-off environments.
Source: bitcoinfoundation.org