I think it is safe to say that right now markets across the world are more or less stuck as House of Representatives Speaker Kevin McCarthy and President Joe Biden continue to negotiate a deal to raise the debt limit. While crypto has been pitched as an alternative that people could put their money and their purchasing power would be relatively safe it still is a volatile asset. Given the economic conditions that it has faced this year it is safe to say it has done a very fine job of being a place that can help protect people from inflation but what we are dealing with now is something else entirely. 

Since the US Dollar is the world's reserve currency the debt that the US would rack up has long been considered a solid investment with buying US bonds and Treasuries being part of people's investment portfolios. No one ever stopped to think what would happen if the US defaulted as that seemed to be such a far-off and unhinged idea though in recent years we have seen this very idea slowly start to emerge. For the most part, cutting back on government spending has been done with the Fiscal Year Government Budget negotiations, and this is why we have had a government shutdown in recent years. Touching the debt was not really in the cards until the last few months when some Conservative Hardliners dug in their heels.

For those of you that do not know the X date is the date that the Treasury Department will fun out of funds to pay the debt and is called that because what exact date it will be is still unknown though right around June 1st is the discussed day. If the US defaults the results would be horrendous and cause an avalanche of unnecessary economic destruction. The stock market would abruptly crash businesses would quickly run into money issues and honestly everything would end up going to hell and a handbasket. What exactly would happen is a bunch of speculation but one theory that seems to be more common is that people would begin to hoard their cash pulling it out of things like the stock market and other asset classes including crypto.

While crypto has been able to demonstrate more independence than most other assets (in large part due to how it can be used to purchase services and goods) if X day does come and hit us it is highly unlikely crypto would be spared from the devastation. My reasoning for this is really two-fold. 

1) Most people will panic and follow the group. Human nature is a heck of a thing and while people will state and claim that they would never do this or that psychology tells us that if everyone is going it odds are you will do and conform to the group. Even initial holdouts will give in overtime typically because we are social creatures who do not want to be ostracized if we can avoid it. It is one of those things it is neither a good nor a bad thing it is just one of those things. 

2) The second reason is much more technological/practical. As accepting crypto as payment for services and goods is still a relatively niche thing. Most stores or brands I hear that accept it are luxury goods/brands and not your neighborhood grocery store or bank to make your mortgage payment. People are going to have to have cash for these things and in theory one could argue that it could spur adoptions by US citizens it is much more likely that they will return to what is tried and true and that is physical cash. It really boils down to being able to make ends meet/being able to purchase basic goods and services. 

Because of what it is and means defaulting would be catastrophic for people, companies, and even other countries. It would really create a new hurdle that technology would have to grapple with and in my eyes lead to a full stop in development in the technology sector particularly with crypto. At the end of the day, both sides say they do not want this, and as much as people have been led to believe 7 of the last 10 debt ceiling increases have had negotiations (the last three were clean increases in large part due to COVID and the spending associated with it). Letting it get this late in the game though is where the issue lies and really where we are starting to enter uncharted water because there is no clear deal right now just waiting to be voted on. 

Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to support me further below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_

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