Bitcoin could be a lifeline to US global dominance as US debt doubles China

The United States federal deficit is projected to reach $1.9 trillion in fiscal year 2025, approximately 2.4 times larger than China’s estimated 5.66 trillion yuan ($780 billion) shortfall.

According to Reuters, the US Treasury recorded a $1.15 trillion deficit during the first five months of the fiscal year (Oct – Feb), marking a 38% year-over-year increase.

The Congressional Budget Office estimates the full-year shortfall at 6.5% of GDP, significantly above the 50-year average of 3.8%, as entitlement costs and interest payments surge.

Debt servicing alone reached $396 billion during the same five months, while federal revenue growth stagnated at around 1% year-on-year.

In contrast, China’s Ministry of Finance has set its 2025 deficit target at 4% of GDP, the highest in over three decades.

US vs China deficit (Source: TAKO)

While the nominal figure is smaller, adjusted estimates from Fitch Ratings suggest China’s actual fiscal deficit may be closer to 8.8% of GDP when off-budget borrowing is included.

The increase reflects a deliberate shift toward infrastructure investment, expanded subsidies, and efforts to offset the prolonged property market slowdown, as outlined in Beijing’s Government Work Report.

The magnitude and trajectory of US debt growth have reignited debate over the dollar’s long-term viability as the world’s primary reserve currency.

Bitcoin’s global role amid increasing sovereign debt

BlackRock CEO Larry Fink recently warned that escalating US deficits could erode global confidence in the dollar and open the door for alternative financial instruments, such as Bitcoin. Bitcoin’s decentralized structure and fixed supply have led some analysts to consider it a hedge against fiat currency devaluation.

Amid these concerns, the concept of Bitcoin as a strategic reserve asset has gained momentum in policy circles. Former President Donald Trump signed an executive order to establish a national Bitcoin reserve using assets seized from criminal cases, positioning digital assets as tools for bolstering fiscal resilience.

However, adoption faces challenges. Bitcoin’s perceived price volatility and regulatory direction continue to raise concerns. The European Central Bank, for example, has dismissed the idea of including Bitcoin in its reserves, with President Christine Lagarde stating it will not happen during her tenure.

As US debt accelerates beyond even China’s rising fiscal imbalance, discussions about reserve diversification, particularly involving Bitcoin, are likely to intensify.

Advocates cite Bitcoin’s deflationary properties and independence from central banks, while the strength of critics’ arguments on its instability and unclear regulatory frameworks is decreasing.

There is growing uncertainty around the future of global monetary policy, and the search for alternative safeguards against systemic fiscal risk may well lead to Bitcoin.

 

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