As a seasoned researcher and analyst with over two decades of experience in financial markets, I find Senator Cynthia Lummis’ proposal to establish a strategic Bitcoin reserve intriguing, yet I remain skeptical about its potential impact on the United States’ staggering debt crisis. With a career rooted in understanding complex economic systems, I have witnessed firsthand how seemingly revolutionary ideas can sometimes fall short when confronted with the sheer magnitude of systemic issues.
According to the head of a non-profit research organization, U.S. Senator Cynthia Lummis’ proposal to establish a strategic Bitcoin reserve won’t be sufficient to tackle the nation’s escalating debt problem, which currently stands at an astounding $35 trillion.
At the North American Blockchain Summit 2024 in Dallas, Texas on Nov 20th, Avik Roy, president of the Foundation for Research on Equal Opportunity, stated that when Senator Cynthia Lummis of Wyoming discusses how a Bitcoin reserve might wipe out the national debt, this is an exaggeration of Bitcoin’s true capabilities.
As an analyst, I’ve considered a hypothetical situation where the United States purchases a substantial quantity of Bitcoin (BTC). While such an action could potentially offer some benefits, it’s crucial to understand that it wouldn’t be sufficient to offset the $35.46 trillion debt that has been escalating almost exponentially since the 1980s.
“The Bitcoin reserve is good, but it does not solve the problem, you still have to actually do the budgetary reforms to get us out of this $2 trillion a year of federal deficits.”
But it could ease tension in the bond market, Roy explained.
“We’ve got at least this ability to back enough of the US dollar with Bitcoin that the bond markets can feel like the US is not going broke.”
Roy expresses worry that a similar scenario to what happened with gold in the 1970s might unfold for the U.S., where their Bitcoin reserves could potentially diminish due to this setup.
Over the past four decades, starting from 1981, I’ve observed a consistent upward trend in the United States’ national debt. This growth has been compounded annually at a rate of approximately 5.3%, transforming an initial debt of $3.81 trillion into a staggering $35.46 trillion, as per data from the US Treasury Fiscal Data.
Senator Lummis proposed the Bitcoin Act back in July, suggesting that the U.S. government should acquire approximately 5% (one million units) of all Bitcoins currently in circulation, intending to keep this investment for a minimum duration of 20 years.
The Wyoming Senator also called on the US Treasury to convert some of its 8,000 tons of gold holdings — worth around $448 billion — into the proposed Bitcoin strategic reserve.
The President-elect, Donald Trump, who is set to take office on January 20th, had previously pledged to accumulate a national reserve of Bitcoins in July.
Additional reporting by Turner Wright.
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2024-11-21 03:08