According to Bloomberg, Standard Chartered recently stated in a report that if President Trump's economic policies increase US debt burden without boosting the economy, the US dollar, a symbol of US credit, could face a significant drop risk in 2026.
US Debt Continues to Accumulate, Foreign Investor Confidence Wavers
On this view, Steve Englander, Global G10 FX Research Head at Standard Chartered, wrote in the report that the expansion of the US fiscal deficit is reducing national savings while increasing demand for foreign savings, translating into a higher current account deficit. If Trump's policies fail to promote economic growth and foreign investors lose confidence, maintaining a high current account deficit could become extremely challenging in the coming months. Englander explicitly warned:
If economic or financial market performance is poor, downside risks to the US dollar will increase with the accumulation of external debt.
Englander further noted that the US dollar and US Treasury bonds have been impacted by Trump's aggressive tariff policies and their chaotic implementation, with some investors beginning to question the stability of US assets. Although Trump has shown willingness to negotiate trade policies, investors are focusing on fiscal issues and the potential new debt scale from his tax bill.
Short-term Investors May Not Immediately Sell US Dollars
However, regarding his assessment, Englander also stated that foreign investors are currently hesitant to completely sell US dollars and traditional safe-haven assets like US Treasury bonds before observing whether Trump's policies can stimulate economic growth. He pointed out that if the tax bill passes, it might provide a short-term economic boost in 2025, but this stimulus could gradually fade by mid-2026 or 2027, when market concerns about long-term growth and debt impact will resurface.
He further warned that if trade policies remain "unstable", investors may be unwilling to further increase US dollar investments, potentially causing "significant" dollar volatility. Additionally, improvements in Chinese and European economic growth prospects could create additional selling pressure on the US dollar. Englander also mentioned that any Federal Reserve policy easing measures might have limited effect, as investors may believe that increased fiscal deficits during an economic recession could lead to an unsustainable debt trajectory, and short-term bond low interest rates might not extend to long-term bonds.
Will US Dollar Depreciation Boost Bitcoin?
It's worth noting that if the US dollar faces depreciation pressure, it could create opportunities for other assets, especially Bitcoin. According to TradingView data, the US dollar index has already dropped 7.96% year-to-date, currently reporting at 99.87.
In contrast, Bitcoin, despite being hit by Trump's tariff policies in April and dropping below $80,000, has recently reached a new all-time high, officially breaking through the $110,000 price barrier.
Moreover, an increasing number of listed companies are now following MicroStrategy's approach, using Bitcoin as a strategic reserve. Against the backdrop of establishing Bitcoin reserves in the US, more sovereign nations are discussing the possibility of establishing strategic Bitcoin reserves.
Therefore, when the US dollar weakens due to debt issues or policy instability, investors might turn to Bitcoin to diversify risks or seek capital preservation.
