Trump’s ‘Big Beautiful Bill’ touts fiscal discipline, but the $2.4 trillion debt that it will add to the United States’ already alarming deficit has Wall Street on high alert. In the meantime, bond yields continue to soar, and uncertainty over US treasuries as a haven looms.
Vincent Liu, Chief Investment Officer at Kronos Research, told BeInCrypto that these factors could further drive demand for Bitcoin. Altcoins, on the other hand, may not fare as well.
Trump’s Economic Vision Meets Early Backlash
The Trump administration hails the One Big Beautiful Bill Act as a significant legislation that will dramatically improve the United States’ fiscal trajectory.
The bill passed the House in May and awaits Senate approval. It would unleash trillions of dollars in tax cuts and slash spending on healthcare, food stamps, and clean energy programs.
While the White House affirmed that the bill will pave the way for an “era of unprecedented economic growth,” others are less certain.
Besides Elon Musk’s references to the piece of legislation as a “disgusting abomination,” Wall Street showed particular unease. Its apprehension reverberated greatly, especially on what the bill means for the nation’s ballooning fiscal deficit.
A $2.4 Trillion Concern
A report released last week by the nonpartisan Congressional Budget Office (CBO) indicates that the bill’s tax breaks, which apply to tips, overtime, and senior benefits, total $3.7 trillion.
While this means taxpayers will keep more of their money, it also represents a significant reduction in federal revenue. When the CBO analyzed whether the bill’s proposed spending cuts would offset this reduction, they concluded it would fall short by $2.4 trillion over the next 10 years.
In essence, although the bill saves $1.3 trillion through program cuts, the overall impact is a $2.4 trillion increase in the national deficit.
That unaccounted gap is what’s worrying financial analysts and economists.
Will the Trump Budget Bill Worsen the Deficit?
Given that the tax cuts are not fully offset by its spending cuts, the government will have to borrow more money to cover its expenses. Borrowing more will also increase the total national debt.
“From there, it’s simple economics: more debt means more bonds, higher yields, and tighter conditions,” Liu told BeInCrypto.
According to the CBO, over the next 10 years, the additional borrowing caused by this bill is projected to result in an extra $551 billion in interest payments. This amount is above what the government would already be paying on its existing debt.
This additional borrowing significantly increases the bill’s total cost, going beyond the direct impact of its tax and spending provisions. It also creates a compounding effect: more government borrowing leads to higher interest payments, which can then require even further borrowing.
This fiscal backdrop is already manifesting in key economic indicators.
Surging Bond Yields and Economic Strain
Less than three weeks ago, soaring bond yields spooked investors as the 30-year bond yield surged past the 5% mark for the first time since October 2023.
“When the 30-year yield breaks 5%, it’s not just a market stat—it’s a warning light. Interest payments are now one of the fastest-growing line items in the federal budget, and as a share of GDP, they’re closing in on historic highs. That means more taxpayer dollars are going to service debt, not invest in the future,” Liu emphasized.
Significantly higher bond rates have broad implications, making life more expensive for everyday Americans. Many common loans, such as mortgages, credit card rates, and auto loans, are directly tied to Treasury yields, rising as bond yields increase.
This escalation in borrowing costs could slow economic activity, counteracting the stimulating effects of any tax cut legislation. Aware of this, investors have already expressed their unease.
Are Markets Losing Patience with US Debt?
Following the House’s approval of the Trump budget bill on May 22, indexes across the stock market experienced a downturn.
Further illustrating Wall Street’s unease, last month’s 30-year bond auction was poorly received, with investors demanding a higher-than-expected yield to purchase the bonds. Its weak performance at the April auction echoed this lack of strong demand, signaling a public perception of America as a riskier investment.
This current reaction from Wall Street to the national debt starkly contrasts with historical responses. In the past, financial markets often showed more leniency, especially when rates were low or crises demanded action.
“Wall Street used to give Washington more slack on deficit spending… But today, that cushion is gone. With high interest rates, ballooning debt, and no immediate emergency to justify it, markets are much less forgiving,” Liu said.
At the same time, these significant fiscal pressures could also cause a global ripple effect.
“US fiscal strain increases global borrowing costs, weakens emerging markets, and puts pressure on economies holding large reserves of Treasuries. The effects aren’t limited to the US they directly impact financial stability throughout the global economy,” he added.
As confidence in traditional safe havens wanes, investors might increasingly be drawn to alternative assets such as cryptocurrencies.
Bitcoin’s Safe Haven Appeal, Altcoins Under Pressure
The reconciliation bill’s fiscal strain might shift investor sentiment toward the cryptocurrency market. However, not all digital assets are created equal in this respect.
“Bitcoin might shine in that uncertainty, but altcoins could face tougher headwinds as investors grow more cautious,” Liu told BeInCrypto.
As government borrowing increases and concerns about inflation or the stability of traditional assets grow, Bitcoin may experience renewed appeal.
An uncertain environment poses a challenge for altcoins, which are typically riskier and more volatile than Bitcoin. Consequently, investors may prioritize capital preservation over speculative gains, leading to their underperformance. This shift causes altcoin prices to decline or stagnate, while Bitcoin may hold its value or even rise.
Should the bill pass the Senate with minimal modification to its fiscal impact, these are likely some potential outcomes to expect.
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