If the United States defaults, “you have to rewrite some cells and some formulas” in any financial spreadsheets you may have.
After a string of bank failures in recent weeks, investors may be looking for other protections. However, even the largest financial institution, the United States Treasury, is showing signs of instability.
The ongoing debate over the debt limit and the threat of defaults has done little to boost investor confidence in the American economy, but it may encourage people to purchase Bitcoin and other hard assets in order to survive the storm.
In a recent episode of the 1000X podcast, Blockworks discussed the potential reactions of the market to a technical default with Avi Felman, head of digital asset trading at GoldenTree, and Jonah Van Bourg, global head of trading at Cumberland. If the United States were to delay the repayment of bondholders, even for a short period of time, this would happen.
In this hypothetical situation, Van Bourg asks Felman, “What do you think the price of bitcoin is?” Suppose that story makes the news?
Felman argues that a surge in purchasing mood might result from the convergence of debt limit fear and the story of Bitcoin as a hard asset.
Van Bourg is even more bullish, saying, “I think we could definitely see all-time highs in short order if the United States were to default.”
According to Van Bourg, a default might be “the most seminal event in financial history,” and the price of bitcoin may reach or perhaps surpass the all-time high of $70,000. “If fiat currency suddenly became unstable, I think you’d see people moving money out of fiat and into crypto in droves,” says one expert.
When asked why, Felman responds, “I think you’re insane. I really doubt that we’ll spend $70,000 on this. Price increases to unprecedented levels are unlikely, according to Felman, “mostly because I just don’t know where that buying is coming from.” “It’s not selling in stores. They may perhaps purchase a little amount.
Some ordinary investors may be enticed back into the market if Felman is correct and a rush to $35,000 is driven mostly by wealthy investors. But, he says, “even then,” retail isn’t as wealthy or as boring as it was under Covid-19.
Felman notes that circumstances were ideal for the last surge to historical highs. Van Bourg argues that a different mix of causes may, over the long run, produce the same kind of behavior.
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