The average budget deficit of the United States will “never” be less than $1 trillion per year in the future — or 4.5% of GDP, worrying data on the fiat economy shows.
Compiled by the U.S. Congressional Budget Office (CBO) and shared by crypto hedge fund manager Travis Kling on Jan. 21, statistics reveal that the annual deficit is set to hit $12.2 trillion for the entire 2020s.
Deficit as GDP share up 55% in 50 years
“Such deficits would be significantly larger than the 2.9 percent of GDP that deficits averaged over the past 50 years,” the CBO itself commented when it released the projections last September.
U.S. average budget deficit 1969-2029. Source: CBO
$1 trillion is more than six times the market cap of Bitcoin (BTC) and four times the market cap of all cryptocurrencies combined.
The data concerned Kling, who like other Bitcoin proponents has drawn clear distinctions between the cryptocurrency and fiat currency.
As Cointelegraph reported, the deficit is not the only worrying aspect of U.S. economic policy to surface in numbers in recent months. Late last year, it emerged that the country’s total debt is now higher than ever at $23 trillion, while the world’s total debt is $255 trillion — or $12.1 million for each Bitcoin.
In simple terms, budget deficits occur when the value of a country’s spending exceeds the value of its revenues. As Kling notes, governments can use fiat to plug the difference, allowing them to increase the money supply which they can then direct as desired.
Over the New Year period, the Federal Reserve added $425 billion to the dollar supply.
Printing fiat to plug deficits “never ended well”
The process has its roots in Keynesian economics, which calls for states and central banks to “manage” the money supply instead of allowing the market to decide prices for goods and services.
Such a setup creates a problem known as the “Impossible Trinity” — attempting to achieve free capital flows, a fixed exchange rate between currencies and independent monetary policy.
“Imagine the allure as a politician of promising your constituents all the spending they want, w/o ever having to raise taxes. Spend more AND cut taxes! There’s no inflation!” Kling wrote on Twitter.
“This has been tried many times before in monetary history and there is no example where it ended well.”
As Saifedean Ammous explains in his book, “The Bitcoin Standard,” preventing “meddling” by governments and central banks would reverse the processes which lead to phenomena such as deficits. This is because fiat would cease to be money “by decree” as its name implies, and would instead operate without a central authority, similar to Bitcoin.
Bitcoin Price Analysis: BTC/USD closes in on critical $10,000
- Bitcoin rises decisively after staying relatively quiet on Saturday.
- Daily RSI starts climbing higher above 50 handle.
Bitcoin (BTC/USD) posted small losses on Saturday and closed the day above the critical Fibonacci level to gain traction during the Asian trading hours. As of writing, BTC was trading at $9,940, adding 2.75% on the day.
With the early rally on Sunday, the Relative Strength Index (RSI) on the daily chart turned north above the 50 mark, suggesting that the buyers are taking control of the price action. Additionally, BTC rose above the 20-day SMA to confirm the near-term bullish outlook.
On the upside, $10,000 (psychological level) aligns as the immediate hurdle for Bitcoin. Above that level, $10.520 (February 13 high) could be targeted. On the other hand, the Fibonacci %23.6 retracement of the rally that started in early January and ended in mid-February seems to have formed a strong support at $9,600 followed by $9,100 (Fibonacci 38.2% retracement of the same rally/50- day SMA). Ahead of these levels, the 20-day SMA could act as an interim support near $9,850.
Bitcoin Plunges to $9,500, $45m BCH SIM Swap, IRS Focused on Cryptocurrency
Another week, another round of Crypto Tidbits. Wow, the past seven days have been quite the trip for Bitcoin, to say the least. After peaking at $10,500 last week, the price of the leading cryptocurrency plunged to $9,700, bounced to $10,300, then took a few hours to crash from that level to $9,250, liquidating hundreds of millions worth of leveraged positions in the process.
The weekly data has echoed Bitcoin’s questionable performance. Per data from Coin360, BTC is down 2.6% in the past week. Altcoins, however, (save for Ethereum and Litecoin and a few other projects) have fared even worse: for instance, the two leading Bitcoin forks are down over 10% apiece and XRP has shed 10%.
Aside from the tumultuous market, the underlying cryptocurrency industry saw a relatively productive week, with there being a number of news stories showing the growth and adoption of these technologies, though others casting light on issues in crypto.
Related Reading: Crypto Tidbits: Bitcoin Slides Under $10,000, JP Morgan & Ethereum, and the US’ Cryptocurrency Crackdown
Bitcoin & Crypto Tidbits
- Coronavirus May Push China to Launch Crypto, Says Ex-Banking Official: Per an article from China Daily — a newspaper owned by the Publicity Department of the Communist Party of China — Lihui Li, a former president of the Bank of China, said that the coronavirus epidemic unfolding will likely accelerate a national digital currency or national crypto. Li purportedly added that a digital currency from the PBOC is likely to benefit retail businesses by decreasing costs and increasing the efficiency of transactions. This was echoed by Fan Yifei, deputy governor of the People’s Bank of China. He said at a news conference held on Saturday that the central bank is going to accelerate its work in the mobile payment field. Bitcoin was not mentioned by these authorities.
- Bitcoin Fixes This: Danish Bank Introduces Negative Interest Rate: Bitwise’s Hunter Horsley recently shared the below image, showing that clients of Danish investment bank Saxo Bank will soon be subject to negative interest rates. All clients holding cash in EUR, CHF, or DKK will be subject to an annual rate of 0% to -3%. This means that if you’re in the worst bracket of -3%, a $10,000 deposit will see you lose $300. Saxo Bank, backing this decision, cited the European Central Bank’s decision to lower its policy deposit rate to -0.5% to stimulate the economy. Many see Bitcoin as an alternative to cash accounts because some suggest it has store-of-value properties, offering no yield but being a disinflationary asset whose value is mainly derived from scarcity.
- Coinbase Becomes Visa Principal Member: Announced in a blog post published Wednesday, Coinbase has become the ” first pure-play crypto company to be approved as a Visa principal member.” This means that moving forward, Coinbase’s crypto-enabled cards will involve better customer experience, “making it easier to spend cryptocurrency in everyday situations.”
- Mining Startup Begins Massive Bitcoin Operation In Texas: In a press statement shared with industry outlet The Block, Layer1 revealed that it has officially launched its Bitcoin mining operation in Texas, purportedly bringing online several containers that have a 2.5-megawatt capacity each. The exact extent of the farm wasn’t disclosed, though the statement mentioned that Layer1 is likely to control 2% of the entire Bitcoin network’s hash rate in the coming months. By the end of 2021, Layer1 wants to control 30% of all of Bitcoin’s hash rate through the Texas site and others they have control over.
- IRS Ramps Up Crypto Efforts: According to an IRS communique received by Bloomberg Tax, the IRS is calling upon crypto companies and executives to convene at a March 3rd summit that will discuss how the tax agency can “balance taxpayer service with regulatory enforcement.” The summit will purportedly involve at least four panels, during which information will be shared about crypto exchanges, compliance, and tax returns. This comes shortly after Steven Mnuchin, the Secretary of the U.S. Treasury, said in a hearing held by the Senate Finance Committee last week that the FinCEN branch of the Treasury will soon roll out “significant new requirements” for entities working with Bitcoin and other digital assets.
- Serenity Is Actively Being Developed, Ethereum Creator Confirms: Vitalik Buterin, the original creator of the blockchain, recently confirmed that the development of Ethereum 2.0 (or Serenity) is going on well. Buterin, during his speech at a recent event mentioned his thoughts on Ethereum 2.0, expressing optimism about the timeline for this blockchain upgrade, which will likely be the biggest upgrade or change made to any blockchain system, ever:
[I] DEFINITELY THINK ETH2.0 HAS BEEN PROCEEDING QUITE QUICKLY AND REGULARLY IN THE LAST FEW MONTHS.A member of the team researching and developing ETH 2.0, Justin Drake, wrote in a recent Reddit “Ask me Anything” regarding Ethereum that he has “95% confidence we launch in 2020.”
- SIM Swap Hack Sees Whale Lose $45 Million: According to a post published to the “BTC” subreddit by a user going by “Zhoujianfu,” they have just been hacked for a large sum of both Bitcoin and Bitcoin Cash (BCH). The addresses attached to the post, confirmed to be owned by the Reddit user through the signing of a message with a Bitcoin private key, suggest that $30 million worth of BCH (around 100,000 coins) and $15 million worth of Bitcoin (1,550 coins) were stolen.
$39 Mln Worth of Bitcoin (BTC) Sold to One of Winning Bidders by US Marshals
The United States Marshals Service sold 3,991 Bitcoins (around $38.8 mln) to one of the two winning bidders. The other one got the remaining 50 BTC that were up for auction.
Another batch of sold coins
The federal law enforcement agency made an announcement about auctioning off about 40,000 confiscated coins on Feb. 1. All bidders were required to deposit $200,000 over a nine-day registration period.
The auction took place on Feb. 18 with a total of 38 received bids. It took the US Marshals more than two days to announce the final results due to a complicated review process.
Not the best Bitcoin holder
The US government has auctioned off 185,230 BTC over the span of six years, gaining $151.4 mln from its sales. Casa CTO Jameson Lopp recently estimated that the US Marshals had lost around $1.7 bln by selling its holdings way too early.
Venture capitalist Tim Draper, who was the winner of the very first auction, was ridiculed for buying 29,657 BTC in 2014, but he eventually got the last laugh.