US Government Debt Interest of $1.5T Will Equal 3X Bitcoin Market Cap in 2023

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Commentators think Bitcoin (BTC) bulls don’t have to wait long for the US to start printing money again.

The latest analysis of US macro data has led a market strategist to predict an end to quantitative tightening (QT) to avert a catastrophic debt crisis.

Analyst: Fed will have no choice with rate cuts

The US Federal Reserve continues to withdraw liquidity from the financial system to fight inflation, undoing years of COVID-19-era money printing.

With interest rate hikes expected to continue to taper off, some now believe the Fed will soon have only one option to halt the process altogether.

Why the Fed will have no choice but to cut or risk a catastrophic debt crisis, summarized Sven Henrich, founder of NorthmanTrader, on January 27.

Higher longer is a fantasy that is not rooted in mathematical reality.

Henrich uploaded a chart showing interest payments on current US government spending, which now totals $1 trillion a year.

A dizzying number, the interest comes from US public debt that exceeds $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henrich noted.

The phenomenon has not gone unnoticed elsewhere in crypto circles. The popular Twitter account Wall Street Silver compared interest payments to a portion of US tax revenue.

The United States paid $853 billion in interest on a debt of $31 trillion in 2022; More than the defense budget in 2023. If the Fed keeps rates at these levels (or higher), we’ll be between $1.2 trillion and $1.5 trillion in interest paid on the debt, he said. he writes.

The US government collects approximately $4.9 trillion in taxes. Interest rates on the US government debt chart (screenshot). Source: Wall Street Money/Twitter

Such a scenario could be music to the ears of those with heavy Bitcoin exposure. Periods of easy liquidity corresponded to an increased appetite for risky assets in the traditional investment world.

The unwinding of this policy by the Fed accompanied the 2022 Bitcoin bear market, and so a pivot in interest rate hikes is seen by many as the first sign of the good times returning.

Crypto pain before pleasure?

However, not everyone agrees that the impact on risky assets, including crypto, will be entirely positive before then.

Related:Bitcoin So Bullish at $23,000 as Analyst Reveals New BTC Price Metrics

As Cointelegraph reported, former BitMEX CEO Arthur Hayes believes chaos will come first, sending Bitcoin and altcoins to new lows before any kind of long-term revival occurs.

If the Fed is faced with a complete lack of options to avoid a meltdown, Hayes believes the damage will already have been done before QT gives way to quantitative easing.

This scenario is less than ideal as it would mean that everyone buying risky assets currently would be exposed to massive declines in performance. 2023 could be as bad as 2022 until the Fed pivots, he wrote in a blog post this month.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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