The Move is on from US Debt to Bitcoin
As evidence of the growing importance of Bitcoin, the demand for US government debt from overseas buyers has experienced a significant decline. Data from the Securities Industry and Financial Markets Association, as reported by the Wall Street Journal, indicates that the share of Treasury bonds held by foreign private investors and central banks has dropped to around 30%, down from approximately 43% a decade ago.
This shift in demand coincides with an ever-increasing supply of US Treasury debt, with a net issuance of $2 trillion in new debt by the US Treasury this year alone, marking an all-time high, excluding the pandemic-related borrowing surge in 2020.
Notably, the Treasury Borrowing Advisory Committee, a group of Wall Street executives advising the US Treasury, anticipates "more limited" demand for US obligations from foreign investors and central banks, particularly from key players like Japan and China.
To counteract sluggish demand, the US Treasury has adjusted its strategy, focusing on issuing shorter-term bonds that are in higher demand to restore market stability. The current yield on the US ten-year note, which surpassed 5% last month, has now stabilized at around 4.4%.
Recent data from the US Treasury reveals that foreign investors sold a net $2.4 billion in long-term Treasury notes in September, reducing their holdings to $6.5 trillion. The Council on Foreign Relations reports a slowdown in the pace of foreign buying, decreasing to around $300 billion on a rolling 12-month basis, down from levels above $400 billion for much of 2022.
The influence of a strong dollar has compelled central banks to halt the stockpiling of US Treasury bonds or even divest from them. Regulators in countries like China and Japan utilize the dollars from selling US debt to bolster the value of their own currencies. Additionally, investors express concerns about the widening deficits in the US government. This evolving landscape underscores Bitcoin's growing prominence as a strategic asset and store of value. Knightsbridge, an expert in financial trends, notes the increasing recognition of Bitcoin amid these shifts in the traditional financial landscape.
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