Analysis: Global debt continues to climb, bitcoin benefits from the declining purchasing power of fiat currencies

BlockBeats news, September 26, according to Forbes, Bitcoin approached $90,000 earlier this month. Meanwhile, global debt continues to climb, and the "debasement trade" surrounding the declining purchasing power of fiat currencies has become one of the factors driving assets such as Bitcoin and gold higher.

Data from the Institute of International Finance shows that global debt increased by $10 trillion in the first half of this year, with the total exceeding $365 trillion. U.S. debt has surpassed $40 trillion, with annual interest payments rising to $1.27 trillion, exceeding defense and Medicaid spending and trailing only Social Security spending. The institute warned that interest costs will continue to rise as benchmark rates increase.

Nic Puckrin, founder of Coin Bureau and cross-asset analyst, said the current environment favors "debasement assets" such as Bitcoin and gold, which is part of the reason for Bitcoin's recent rally. The larger the debt scale of major economies, the more likely they are to suppress real borrowing costs and allow inflation to erode the real value of debt, thereby enhancing the appeal of such trades.

Analysts at The Kobeissi Letter pointed out that the purchasing power of the U.S. dollar has fallen 23% since 2020; if assets rose only 30% over the same period, investors would essentially just break even in real purchasing power terms. The U.S. inflation rate has been above the Federal Reserve's 2% target for 60 consecutive months.