The more government debt there is, the greater the potential opportunities for cryptocurrency bulls. “One thing is clear, democracies around the world are having trouble reining in deficit spending,” Coinbase (COIN) CEO Brian Armstrong said at the Coinbase Annual Summit in New York City on Thursday. “If you study history... once currency is decoupled from hard commodities, the inevitable scenario is that currency will be overprinted and overissued, right?”
Armstrong says it’s no coincidence that Bitcoin’s (BTC-USD) record price coincides with U.S. debt reaching an all-time high.
“I would like the U.S. to remain a reserve currency,” he added, “but if the debt problem is not resolved, I do think Bitcoin will eventually have to become a reserve currency, for better or worse.”
Armstrong joins Tesla (TSLA) CEO Elon Musk in warning about the impact of rising government debt. Musk, who recently feuded with President Trump over the issue, blasted the debt expected to be created by the administration's signature "big and wonderful" tax bill.
The cryptocurrency industry has seen a series of catalysts fuel the bullish narrative this year.
The Trump administration has moved to create a Bitcoin strategic reserve (although its framework is still to be determined). Companies like GameStop (GME) and Strategy (MSTR) have become big buyers of Bitcoin to diversify their cash holdings. Trump Media & Technology (DJT) recently announced a plan to raise $2.5 billion to buy Bitcoin.
Stablecoin legislation is advancing at the government level. Circle's (CRCL) initial public offering (IPO) was also met with enthusiasm.
Morningstar data on 294 cryptocurrency funds showed that they saw net inflows of more than $7 billion in May, the highest since December. Bitcoin funds attracted $5.5 billion in net inflows in May, while Ethereum funds attracted $890 million in net inflows.
Despite the positive news, Coinbase shares are up just 3% year to date, roughly in line with the S&P 500 Index (^GSPC).
The company's first-quarter sales fell 24% year-over-year as deal activity slowed.
Analysts continue to warn that trading conditions will be more challenging for the rest of the year.
"We remain elusive in identifying the next cryptocurrency catalyst that will deeply attract retail investors and thereby drive Coinbase earnings," JPMorgan analyst Ken Worthington wrote in a note.
Coinbase CEO Brian Armstrong (left) discusses the future of stablecoins with Circle CEO Jeremy Allaire at the Coinbase annual summit in New York City.・Yahoo Finance
Worthington rates Coinbase stock "neutral" with a $215 price target, implying 16% downside from current levels.
Of the 30 sell-side analysts covering Coinbase, 30% rate the stock a "buy," while 535 rate it a "hold," according to Yahoo Finance data.
The author of this article, Brian Sozzi, is the executive editor of Yahoo Finance and a member of Yahoo Finance's editorial leadership team.