Focus on cryptocurrencies return as US debt reaches $22 trillion
The history of cryptocurrencies can be traced back to the 2008/9 financial crisis. The inspiration for the launch of Bitcoin was that fiat currencies, which are regulated by the central banks, had failed the system. Therefore, the goal of Satoshi Nakamoto was to create a currency that is decentralized and under no-one’s specific control. All this happened because of the financial crisis, which was caused by the increased use of subprime mortgages.
Today, the global economy has continued to be riskier than it was before the financial crisis. This is because of the vast amount of corporate, federal, and municipal debt. Yesterday, the government debt of the US moved above $22 trillion. The growth of debt has been accelerated by the tax cuts that were implemented by the Trump administration. Corporates too have been increasing the debt, fueled by a prolonged period of low interest rates. In total, companies hold more than $9 trillion in debt. Most of this debt has gone to mergers and acquisitions, dividends, and share buybacks. Households too have continued to load up more debt, with estimates showing a combined household debt of more than $13 trillion. As interest rates continue to rise, delinquencies could happen, which could expose the US economy to huge risks.
As the situation continues, many crypto enthusiasts have continued to focus on digital assets. They believe that cryptos could become safe havens because they are not regulated by anyone. In fact, renown crypto enthusiast and hedge fund manager, Michael Novogratz said that this could be the best time to hold crypto because of the increasing risks. A number of renowned economists have also warned that the US economy could be heading towards a crash.
Positive sentiment has caused the price of cryptocurrencies to rise. This week, the price of Bitcoin reached a high of $3700. The price has eased a bit and is currently at $3660. This price is slightly above the 61.8% Fibonacci Retracement level. It is also along the 21-day and 42-day EMAs on the hourly chart. The pair could break out of this channel in either direction.