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Elon Musk, the mercurial billionaire whose fickle interest in bitcoin has waned since 2021, is stoking fears the U.S. dollar could be heading for a $36 trillion disaster.
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The bitcoin price has swung wildly over the last month, bouncing between highs of $65,000 per bitcoin before crashing toward $50,000 as a legendary bitcoin trader suddenly flips his bitcoin price prediction.
Now, as details of Donald Trump’s mystery crypto project trickle out, Musk has backed a $36 trillion “by the end of 2024” warning over the spiraling interest payments on the huge U.S. national debt pile.
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Elon Musk, Tesla’s billionaire chief executive, has warned the U.S. dollar is under pressure from … [+]
“Interest payments on the national debt are now higher than the entire Defense Department budget and rising,” Musk wrote on X, sharing a popular finance and economics account’s post.
“We will reach $36 trillion easily by the end of 2024,” the Wall Street Silver account Musk quoted wrote. “And we are on pace for over $1.2 trillion in interest to be paid on the debt in the next 12 months. That is about 25% of all govt revenue ($5 trillion per year) going to interest on the debt.”
U.S. debt interest payments are forecast to hit $870 billion this year, according to a recent analysis by the Congressional Budget Office, after runaway inflation pushed the Federal Reserve to hike interest rates at a never-before-seen clip in the aftermath of huge Covid-era spending and money-printing.
Earlier this year, Bank of America analysts warned the U.S. debt load is about to ramp up to add $1 trillion every 100 days—fueling a potential bitcoin price surge.
The Fed is currently poised to begin an interest rate cutting cycle, with the market heavily betting on a rate cut during its September 17 to September 18 meeting.
The size of the interest rate cut and the Fed’s outlook on the rest of 2024 are expected to cause volatility for the bitcoin price, wider crypto market and risk assets across the board, with one closely-watched analyst warning of “significant market pain” to come.
The bitcoin price has dropped back from its recent peak of over $70,000 per bitcoin but remains far … [+]
“Many predict that a new liquidity cycle is imminent, expecting lower interest rates to boost all asset prices, as they traditionally have. However, the critical issue is timing. Instead of taking a broad view, savvy investors focus on the details, which reveal that interest rate cuts could initially cause significant market pain,” market analyst Markus Thielen, founder of 10x Research, wrote in an emailed note.
Thielen pointed to the years 2018 and 2019 as “a notable precedent: bitcoin sold off in the weeks following previous rate cuts while prices rallied during the pause in rate changes.”
Looking ahead, Thielen warned “U.S. political uncertainties” and persistently weak economic data signals “potential declines for risk assets” such as bitcoin.
“Interest rate cuts do not ensure higher bitcoin prices, particularly when protocol revenues sharply decline, signaling reduced usage,” Thielen wrote. “These are troubling indicators, but 99% of traders remain unaware. A bitcoin drop below $50,000 is inevitable.”