Analyst: Bitcoin looks to be long-term hedge against inflation

The SEC’s nod to Bitcoin ETFs offers a new financial avenue against the backdrop of soaring U.S. national debt.

The recent approval of Bitcoin ETFs by the Securities and Exchange Commission (SEC) marks a pivotal moment for cryptocurrencies in the United States. Avik, an analyst for Forbes, articulates that Americans can now purchase Bitcoin as a hedge against a potentially weakening U.S. dollar, which is under strain from the escalating federal debt. The SEC’s decision ensures the longevity of this alternative financial instrument.

According to @truflation.

US year on year inflation is now sub 2%.

Sitting at 1.89%.

While the US Govt is reporting 3.4%.

Perfect timing for an election year, $8T of debt refinancing and the #Bitcoin halving.

Expect to see “shocking” lower numbers into Q2 leading to a rapid… pic.twitter.com/laIIGL3RtE

— British HODL ❤️‍🔥🐂❤️‍🔥 (@BritishHodl) January 20, 2024

Forbes elaborates on this perspective, explaining that the SEC’s approval makes it increasingly challenging for the US government to eliminate the domestic Bitcoin market. The article parallels Argentina, where citizens hold a great deal of Bitcoin.

Forbes explains that the SEC’s approval makes it increasingly challenging for the U.S. government to eliminate the domestic Bitcoin market. The article parallels Argentina, where citizens hold a substantial portion of U.S. dollars despite stringent currency exchange controls, demonstrating the limitations of government intervention in currency markets.

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Currently, at about $34 trillion, the U.S. federal debt creates an environment where Bitcoin’s liquidity becomes more appealing, especially to large institutions seeking stable value storage. Bitcoin’s potential to rival U.S. Treasury bonds in terms of liquidity emerges when its market capitalization approaches around $7 trillion, an increase from its current value.

However, for Bitcoin to achieve such a market cap, it would need much broader acceptance as a store of value than it currently enjoys. At this stage, a U.S. crackdown on Bitcoin could backfire, echoing the counterproductive effects of Argentina’s capital controls. Such a move could signal to the world markets a lack of confidence in the dollar’s superiority.

In an ideal scenario, the U.S. would address its fiscal challenges, particularly the soaring healthcare spending, thereby stabilizing the federal debt. This fiscal reform would be the most sustainable solution. However, until such reforms are realized, Bitcoin is a viable option for Americans seeking financial security in an era of rising national debt.

Read more: Argentina’s citizens embrace crypto despite central bank ban

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