$40 Trillion US Debt Crisis Sparks Bitcoin and Gold Bullishness
A $40 trillion US debt alert has sounded as BlackRock unexpectedly turned bullish on Bitcoin and gold. The warning comes from Silicon Valley moguls who believe that if the 30-year U.S. Treasury yield hits 6%, it will trigger a 'death spiral'.
According to Chamath Palihapitiya, co-host of the All-In podcast, hitting 6% would be the start of this death spiral, which means more expensive long-term capital for the federal government already carrying approximately $40 trillion in debt.
The Treasury faces a problem as it must refinance $10 trillion in debt over the next 12 months. These bonds are maturing immediately, and once they mature, the principal must be returned to holders, then the government returns to the Treasury market to issue new debt and borrow again to roll it over.
Investors like Stanley Druckenmiller believe that only reducing government borrowing can truly and sustainably lower long-term bond yields. He also predicts that due to the United States' ever-expanding ~$40 trillion debt burden, the dollar will cease to be the world's reserve currency within 50 years.
Robert Mitchnick, head of crypto assets at BlackRock, believes that 'debt and deficit levels are the primary concern in the market.' He notes that when these worries resurface in headlines, they often benefit 'assets like Bitcoin and gold.'