- Mike Novogratz and Arthur Hayes both call on worried Bitcoin investors to zoom out.
- Government spending is unlikely to decrease no matter who wins the US election.
- Bitcoin could become a store of value if US war expenditures keep rising.
For more than three months now, Bitcoin has been stuck between $73,000 and $59,000.
It’s a long time for such a volatile asset to remain in the same price range. And market participants — like PayPal co-founder Peter Thiel — have started to wonder whether Bitcoin has lost steam for good.
But until “the government actually stops spending like drunken sailors,” Bitcoin’s future is assured, Mike Novogratz, CEO of crypto investment firm Galaxy Digital, told CNBC Tuesday.
The US budget deficit is projected to increase 27% next year, to $1.9 trillion, the Congressional Budget Office reported two weeks ago.
The main reasons: the costs of student loan relief, healthcare, resolving banking failures, as well as military aid given to Ukraine and Israel.
But Novogratz said this isn’t a problem specific to the Biden administration.
Former president Donald Trump “grew government spending just as wildly as Joe Biden,” Novogratz said.
”These have been the two worst presidents in terms of increasing debt, in the history of our country,” he added.
Bitcoin was designed in such a way that only 21 million Bitcoin can ever exist.
Because of its hard cap on supply, the top cryptocurrency is considered by some as a hedge against government spending and monetary debasement.
War expenditures
Arthur Hayes, co-founder of crypto exchange BitMEX, concurred with Novogratz on the topic of government spending in a Tuesday blog post.
He placed particular emphasis on the idea that US military expenses, focused now on Ukraine and Israel, will likely only increase.
”Nations are turning inwards and ensuring all facets of the national economy are ready to support the war effort,” Hayes said. “That means savers will be called upon to finance their nation’s wartime expenditures.”
Two ways the US government may do that: Instruct banks to lend to specific industries or order banks to buy government bonds at below-market value so that the state can hand out subsidies itself.
In either case, Hayes said, inflation will destroy people’s savings.
“The only way to escape, assuming no capital controls are erected, is to buy a store of value outside of the system like Bitcoin,” Hayes said.
Novogratz, meanwhile, said that until spending gets under control, “Bitcoin as a core holding makes all the sense in the world.”
Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin and macroeconomics? Reach out at tcarreras@dlnews.com
