Bitcoin and the public debt problem of America

The federal budget deficit of the United States is expected to reach 1.9 trillion USD in fiscal year 2025, approximately 2.4 times the figure of 5.66 trillion yuan ( equivalent to 780 billion USD ) of China.

According to Reuters, the U.S. Treasury recorded a deficit of $1.15 trillion in the first 5 months of the fiscal year ( from October to March 2), marking a 38% increase compared to the same period last year.

The United States Congressional Budget Office (CBO) estimates that the annual deficit will account for 6.5% of GDP, significantly higher than the 50-year average of 3.8%, due to soaring social welfare costs and rising borrowing interest rates.

Interest costs alone have reached 396 billion USD in the first five months of the fiscal year, while federal revenue growth has nearly stalled, only achieving about 1% compared to the previous year.

Meanwhile, the Chinese Ministry of Finance has set a budget deficit target of 4% of GDP for 2025, the highest in over three decades.

Comparison of the U.S. budget deficit vs. China | Source: TAKOAlthough the nominal figures are smaller, adjusted estimates from Fitch Ratings suggest that China's actual deficit could reach 8.8% of GDP when including off-budget loans.

This increase reflects Beijing's intentional shift towards infrastructure investment, expanding subsidies, and mitigating the impact of the prolonged downturn in the real estate market, according to China's Government Work Report.

The rapid increase and enormous scale of US public debt is raising debates about the sustainability of the USD's position as the global reserve currency.

Bitcoin and its Global Role in the Context of Rising Public Debt

BlackRock CEO, Larry Fink, recently warned that the growing deficit of the U.S. could erode confidence in the USD, opening up opportunities for alternative financial instruments like Bitcoin. With its fixed supply and decentralized nature, Bitcoin is increasingly seen as a hedge against the depreciation of fiat currency.

In response to these concerns, the idea of using Bitcoin as a strategic reserve asset is increasingly gaining the attention of policymakers. President Donald Trump once signed an executive order to establish the National Bitcoin Reserve Fund by using assets seized from criminal cases, viewing digital assets as a tool to strengthen financial capabilities.

However, the adoption of Bitcoin still faces many challenges. Price volatility and an unclear legal environment continue to be major barriers. For instance, the European Central Bank (ECB) has rejected the idea of including Bitcoin in foreign exchange reserves, with President Christine Lagarde asserting that this will not happen during her term.

As U.S. public debt accelerates, surpassing even China's increasingly large fiscal imbalances, discussions about diversifying reserve sources – particularly regarding Bitcoin – are likely to continue heating up.

Supporters of Bitcoin emphasize its deflationary characteristics and independence from central banks. Meanwhile, opposing arguments related to Bitcoin's volatility and legal risks are becoming increasingly weak.

The increasing instability in global monetary policy is driving the demand for new financial protection measures against systemic risks. And in this process, Bitcoin may become an important solution.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should conduct thorough research before making decisions. We are not responsible for your investment decisions.

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Itadori

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