Could Crypto Save the U.S. from a Debt Crisis and Push Bitcoin Above $150k?

The U.S. is facing an escalating debt crisis, with its national debt surpassing $35.46 trillion, and former House Speaker Paul Ryan believes that crypto—specifically stablecoins—could help avert a financial collapse. In a recent op-ed for The Wall Street Journal, Ryan argues that the mounting U.S. debt could jeopardize the dollar’s position as the world’s reserve currency. He suggests that stablecoins might provide a temporary solution by creating a new source of demand for U.S. Treasury debt.

Stablecoins: A New Source of Demand for U.S. Debt

Dollar-backed stablecoins like Tether (USDT) and USD Coin (USDC) have rapidly emerged as key players in the crypto market, with over $95 billion in U.S. Treasury bills between them. According to their latest reserve reports, Tether holds around $84.5 billion, while Circle (the issuer of USDC) holds $11.1 billion in U.S. government debt. As stablecoins continue to grow and provide a fiat on-ramp for traders, they could offer a vital source of demand for U.S. Treasury bills, absorbing some of the debt traditionally purchased by foreign nations.

Historically, China has been a major buyer of U.S. debt, holding as much as $1.27 trillion in U.S. Treasury bills in 2013. However, this has declined significantly, and as of April 2022, China’s holdings have dropped below $1 trillion. Experts attribute this reduction to geopolitical tensions and shifting trade policies. The growing participation of stablecoin issuers as purchasers of U.S. debt could help reduce the country’s reliance on traditional foreign buyers, especially in a time of global instability.

The Risk to the Dollar’s Reserve Currency Status

Ryan highlights a serious concern: as foreign interest in U.S. debt wanes, the dollar’s dominance as the global reserve currency could be in jeopardy. If this trend continues, the U.S. may find it more difficult and expensive to borrow money, threatening its economic influence. Stablecoins, backed by the dollar, could play a role in stabilizing the situation in the short term. Their growth as a bridge between fiat and crypto markets could provide the U.S. with a much-needed cushion, allowing it to maintain a stronger position in global finance.

The Hoover Institution's Call for U.S. Leadership in Digital Currencies

A recent report by the Hoover Institution, titled "Digital Currencies: The U.S., China, And The World At A Crossroads," underscores the need for the U.S. to assert its leadership in the digital currency space. While the report does not advocate for a central bank digital currency (CBDC) or a digital dollar, it stresses that the U.S. must work to establish global standards for digital finance to counteract China’s growing influence in this sector.

China’s push to launch its own central bank digital currency (CBDC) has put the U.S. in a race to secure its position in the digital economy. The Hoover Institution recommends that the U.S. adopt stablecoins as a way to transition into the digital future, collaborating with democratic partners like the G7 to set principles and standards for global digital finance. The report also emphasizes that the U.S. should not only aim for leadership in digital currency development but also ensure that privacy, security, and accountability are core to its approach.

With the right regulatory framework in place, stablecoins could help restore America’s economic influence, especially as they offer an alternative to China’s centralized digital financial system, which is far more restrictive and controlled.

Can Bitcoin Solve the U.S. Debt Crisis?

Another bold proposal to address the U.S. debt problem comes from Senator Cynthia Lummis, who introduced the Bitcoin Act in July 2024. Lummis has proposed creating a national Bitcoin reserve, suggesting that the U.S. could acquire 1 million BTC to serve as a store of value to help alleviate the national debt. She argues that, by taking profits from Bitcoin’s appreciation, the U.S. could be debt-free within 20 years.

However, while the idea is intriguing, the math doesn’t quite add up. As of November 2024, Bitcoin’s market capitalization is around $1.74 trillion, and with a total supply of 21 million BTC, the price of a single Bitcoin would need to rise to around $35.46 million for the U.S. to pay off its $35.46 trillion debt. This is an unlikely scenario, given Bitcoin’s limited supply and the vast value of global assets like gold, silver, and stocks.

While Bitcoin has been on a bullish run, recently reaching highs above $93,000, the market would need to see an extraordinary rally for Bitcoin to reach the $35.46 million price point required to pay off the national debt. As of November 13, Bitcoin has gained 70% between September and November, fueling speculation that it could reach $100,000 by the end of the year. Some analysts even predict that Bitcoin could hit $150,000 with another similar rally.

Caution Advised Amid Bullish Sentiment

Despite Bitcoin’s recent surge, traders should exercise caution. The Relative Strength Index (RSI) on Bitcoin’s weekly chart is currently reading at 72, signaling that the asset may be overbought and due for a correction. While the market momentum is positive, these indicators suggest that the price could face some resistance before pushing higher.

Conclusion: Crypto’s Potential Role in Solving U.S. Debt Crisis

The U.S. debt crisis is a serious challenge, and while stablecoins and Bitcoin offer potential solutions, the road to stability is far from simple. Stablecoins could help absorb some U.S. debt, reducing reliance on traditional foreign buyers like China, while offering a temporary solution to the shrinking demand for U.S. Treasury bills. However, this would require significant growth in the adoption of crypto assets and a well-regulated framework.

As for Bitcoin, while it’s unlikely to directly solve the U.S. debt problem, the idea of leveraging Bitcoin as a store of value remains an intriguing concept. But for Bitcoin to play a major role in the national economy, it would need to experience a level of price appreciation that seems improbable in the short term. While Bitcoin’s price might reach new highs in the coming months, reaching $150,000—or the $35.46 million price point needed to pay off the debt—appears far-fetched.

Ultimately, crypto offers some potential solutions, but the U.S. will need a multi-faceted approach to address its growing debt and economic challenges. Whether through stablecoins or other digital assets, the future of finance may well be shaped by how well the country adapts to this emerging landscape.