Musk's Shocking Warning! $38.3 Trillion Debt Triggers Dual Bull Market for Bitcoin and Gold

Tesla and SpaceX founder Elon Musk recently issued a stern warning in a public interview, pointing out that the United States’ ever-expanding $38.3 trillion federal debt is rapidly approaching an unsustainable level, potentially triggering the next surge in Bitcoin prices and forming a “parallel hedging trend” alongside gold. Musk stated that the U.S. is increasing its money supply by about $2 trillion per year, and that the traditional monetary system is under structural pressure.

Musk’s Core Argument: Energy Is the Real Currency

In a recent public interview, Musk pointed out that as the U.S. fiscal deficit continues to widen, the traditional monetary system is under structural pressure. He believes that fiat currency relies long-term on government credit and fiscal discipline, and that the U.S. is now expanding the money supply at “unprecedented levels.” Musk said: “The concept of money is weakening; in the long run, energy is the most fundamental form of currency.”

He emphasized that Bitcoin is supported by a high-energy-consuming computational system, and its value is directly related to energy costs, which is a key source of its anti-inflation properties. Musk added: “You can print fiat currency, but you can’t fake energy.” This view continues the stance he has expressed on social platforms in recent months—that Bitcoin, due to its energy-backed nature, can provide some value stability during periods of high inflation and high deficits.

This “energy currency theory” provides a unique perspective on understanding Bitcoin’s intrinsic value. Traditional economists criticize Bitcoin for lacking intrinsic value because, unlike gold, it has no industrial use, and unlike fiat currency, it has no government backing. But Musk’s argument is that Bitcoin’s value is anchored in the energy consumed during mining. Each Bitcoin requires real electricity to produce, and this energy input sets a baseline for Bitcoin’s production cost.

From an economic perspective, this energy cost theory is similar to the labor theory of value. Marx believed that the value of goods is determined by the socially necessary labor time consumed in their production. Musk’s argument is that Bitcoin’s value is determined by the energy consumed during its production. When energy prices rise, mining costs increase, and miners are unwilling to sell Bitcoin below cost, thus providing price support.

The Three Pillars of Musk’s Energy Currency Theory

Energy cannot be faked: Fiat currency can be printed infinitely, but energy production is constrained by the laws of physics

Bitcoin is directly tied to energy: Mining costs provide a price floor for Bitcoin

Anti-inflation properties: When fiat currency depreciates due to overissuance, energy-anchored assets have stronger value preservation capabilities

This theory also explains why the Bitcoin holdings under Musk’s Tesla and SpaceX are close to $2 billion. As a deep participant in the energy industry (Tesla produces electric vehicles and solar products), Musk understands the core role of energy in the economic system better than most people.

The Systemic Risk of $38.3 Trillion in Debt

Musk specifically pointed out that the U.S. fiscal deficit has remained high for consecutive years, and interest payments are growing faster than the economy. He said the U.S. is increasing its money supply by about $2 trillion per year, which may suppress the medium- and long-term value of the dollar. The debt scale of $38.3 trillion has already surpassed 120% of U.S. GDP, a ratio that is extremely rare in peacetime.

A debt-to-GDP ratio above 100% is generally seen as a warning sign of fiscal unsustainability. Historically, only in extreme situations like world wars have major countries allowed their debt ratios to reach this level. The fact that the U.S. has reached such a high debt ratio during peacetime with no clear plan to reduce it is the core reason for Musk’s warning.

Even more serious is the snowball effect of interest payments. As the debt level rises and interest rates increase, U.S. government interest payments have surpassed defense spending, becoming the largest single item in the federal budget. This structure means that even if the government cuts other spending, the interest burden will continue to rise, creating a vicious cycle. The only solution is to dilute the real value of debt through inflation, which is why Bitcoin and gold are favored as anti-inflation assets.

Analysts point out that against the backdrop of major global economies pushing for deleveraging and industrial chain restructuring, the “debasement trade” is regaining attention from institutional investors. This type of strategy usually involves reducing exposure to fiat currency assets and increasing allocation to gold, silver, energy, and some digital assets.

Parallel Hedging Trend of Bitcoin and Gold

Although Bitcoin has fallen sharply since hitting a historic high of $126,000 in October, its gains over the past two years are still close to 200%. Prices of precious metals, including gold and silver, have also climbed in recent months, with gold nearing a historic high of $3,700 per ounce, reflecting increased investor allocation to “hard assets” against the backdrop of the end of high interest rates and slowing economic growth.

The simultaneous rise of Bitcoin and gold has formed an interesting parallel hedging trend. Traditionally, gold is seen as the ultimate safe-haven asset, its value validated over thousands of years. Bitcoin, by contrast, is an emerging digital safe-haven asset, whose value proposition is based on limited supply (21 million maximum) and decentralization. When both rise together, it signals declining confidence in fiat currency, with investors seeking value storage outside the fiat system.

However, there is still disagreement in the market as to whether Bitcoin is a safe-haven asset or a high-risk asset. AJ Bell Investment Director Russ Mould pointed out: “At this stage, the market still sees Bitcoin as a risk asset rather than a traditional safe-haven.” He noted that when gold and silver rise due to safe-haven demand, Bitcoin sometimes pulls back, indicating its trading behavior remains similar to high-risk assets.

Other institutions believe that Bitcoin’s limited supply, ongoing depreciation pressure on fiat currency, and steady entry of institutional investors will drive it toward a “structural bull market.” Some asset management firms have noted that if the Fed enters a rate-cutting cycle in the future, it could reignite the market potential for cryptocurrencies, especially in an environment of falling U.S. bond yields and improving liquidity conditions.

Alternative Prediction: AI Technology May Alter the Trajectory of Inflation

Musk also raised another possibility: advances in artificial intelligence technology may significantly boost productivity in the next three years, leading to supply expansion and suppressing inflation. Musk predicted, “Within three years, the growth rate of U.S. goods and services supply may outpace inflation, resulting in mild deflation and bringing interest rates back to lower levels.” If this prediction comes true, the debt burden would be eased due to lower real interest rates.

However, most economists are cautious about the timing of an “AI-induced deflationary cycle,” believing such technological dividends require a longer production chain rollout to have a real impact. This view adds complexity to Musk’s bullish predictions for Bitcoin and gold: if AI does bring about deflation, the appeal of anti-inflation assets may decline.