Bitcoin has soared since its inception just over 15 years ago, largely due to a global financial crisis that has turned into a $365 trillion emergency.
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The price of bitcoin is up 300% since its 2023 low, but remains down 30% from its 2025 high of $126,000 per bitcoin (although that could be about to change).
Now, as the market braces for an AI “bank panic” that could trigger financial chaos, US President Donald Trump confirmed that the worst fears of many bitcoin holders may be about to come true.
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US President Donald Trump has launched a plan to reduce the US debt by $40 trillion in line with inflation, which could send the price of bitcoin through the roof.
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“You know, inflation, certain levels of inflation, will also pay off that debt very quickly,” Trump said. Time in a wide-ranging interview, asked about his concerns about the economy overheating.
Trump’s comments confirm a possible scenario suggested by JPMorgan analysts last year.
“We might consider a less straightforward path to reducing the U.S. government’s debt burden,” the bank’s researchers write. “Policymakers could erode the Fed’s independence and effectively inflate the debt by favoring a stronger nominal growth environment, characterized by higher inflation and, in the short term at least, lower real interest rates.”
This week, the Federal Reserve’s favored measure of inflation, the Personal Consumption Expenditures (PCE) Price Index, showed that prices rose 3.4% since the same period last year, a slow rise from the previous month but well above the Fed’s 2% inflation target – and as the latest US jobs report shows a sharp slowdown in hiring.
“(The) chilly report shows that the jobs market may not be as healthy as previous data might have suggested,” Nic Puckrin, a markets expert and former Goldman Sachs analyst, said in emailed comments.
“Wage growth is more anemic than expected at 3%, while payrolls were well below expectations at 28,000, with August also revised down. That’s a problem for the Fed: It forces the central bank to choose between two evils. Another rise, and you risk tipping the scales toward unemployment at a time when Americans are already grappling with the cost of living crisis. Hold, and inflation could become uncontrollable.”
The market estimates there is a 70% chance the Fed will vote to “hold” interest rates steady at its next meeting in late October, according to the CME tracker.
The Fed now sees inflation exceeding its five-year target, with most policymakers not expecting it to reach its target until 2029.
Meanwhile, U.S. debt has more than doubled over the past decade to $40 trillion, surpassing the expectations of the Congressional Budget Office (CBO), which predicted that overall borrowing would not reach that milestone this year.
The rapid rise in US (and global) debt is driven by massive spending under the current and previous Trump and Biden administrations, coupled with higher interest payments due to Fed rate hikes – something Trump has repeatedly called for a sharp reduction in.
Trump, along with his Treasury Secretary, Scott Bessent, and the world’s first billionaire, Elon Musk, have all said that technology-led growth is the only way to escape the debt death spiral in which the United States is caught.
“I know I’m the best in the world…you can pay off the debt other ways. But the only thing you can do is pay it off through growth, and we’ve never had growth like this,” Trump said, referring to the development of artificial intelligence that is currently supporting the economy through historically high spending.
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Bitcoin has rebounded in recent weeks, with traders increasingly betting that the price of Bitcoin will continue to rise.
Forbes Digital Assets
The price of bitcoin soared last month as Bessent’s intervention in the bond market reignited the so-called write-down trade that has propelled gold and bitcoin to unprecedented highs in recent years.
“The long-term narrative of bitcoin as a hedge against fiat depreciation remains intact, but near-term valuations can still be directly influenced by policy rates and dollar liquidity,” analysts at Bitfire Research wrote in an emailed note.
Gn bussni
