The most fearful scenario for Bitcoin: US debt skyrockets to 36.6 trillion dollars, will the economic recession lead to a BTC pullback?

Bitcoin reached a historical high of $112,040 this week, with optimism enveloping the market, but the unfavourable information regarding the U.S. economic recession cannot be ignored. On Monday (July 7), U.S. national debt increased by $367 billion, reaching an astonishing historical high of $36.6 trillion. Previously, U.S. President Donald Trump signed the "Beautiful Big Bill" last week, raising the debt ceiling by $5 trillion. This series of staggering numbers not only raises concerns about the outlook for the U.S. economy but also leads investors in the crypto assets market to ponder: Does this signal that Bitcoin is about to fall to $95,000? What will be the fate of Bitcoin under the shadow of the economic recession?

US Housing Market Warning: A Leading Indicator of Economic Recession?

Analysts, including CRPS expert and Ivory Hill Wealth founder Kurt Altrecht, have issued a stern warning regarding the U.S. real estate market. Altrecht pointed out that a strong economic indicator, which typically surges significantly during past economic downturns, has now reached concerning levels.

He is referring to the "monthly supply of newly built single-family homes," which has currently reached 9.8. Altricht stated: "Historically, this high level only appears during periods of economic recession or just before a recession." This means that builders are facing not only high prices but also the issue of evaporating demand. Signs of weakness in the real estate market have become increasingly evident.

(New single-family home supply in the United States, Source: X, Ivory Hill)

Currently, the inventory of newly built single-family homes in the United States is close to a 10-month supply. Altrichter believes that this weakness is not only due to high interest rates but more importantly, to what he calls "demand evaporation." If the historical pattern — the relationship between housing oversupply and overall economic recession — continues to repeat itself, its impact could have a negative effect on higher-risk assets including Bitcoin. While crypto assets may benefit from currency depreciation in the long run, in the short term, the typical reaction of investors is to avoid risk, opting instead to hold cash and short-term bonds. This also explains why the market is concerned about the short-term trend of Bitcoin.

2. Is the Printing Press Starting? The U.S. Fiscal Dilemma and the "Hedging" Theory of Bitcoin

Faced with massive debts, Strike co-founder and CEO Jack Mallers stated that the only viable option for the U.S. Treasury is to expand the monetary base—essentially "printing more money." Mallers believes that the government cannot default on its debts, which means that devaluation will become the last resort. He indicated that this creates an ideal environment for Bitcoin to enter a new bull market. From this perspective, Bitcoin, as an anti-inflation asset, will highlight its value against the backdrop of fiat currency devaluation.

However, there are also different voices in the market. Some investors believe that Bitcoin's breakthrough of 112,040 USD on Wednesday is unrelated to fiscal issues or concerns about economic recession. Instead, they attribute the rise in the stock market to expectations of changes in Federal Reserve policy.

3. The Fate of Bitcoin: The Dual Influence of the Federal Reserve and Tech Stocks

The trend of Bitcoin largely depends on the actions of the Federal Reserve. At the same time, there is increasing speculation that Trump may push for a replacement of Federal Reserve Chairman Powell. If this happens, it could lead to a more dovish monetary policy. Trump has repeatedly called for the Federal Reserve to lower interest rates. According to Fox Business News, he is currently evaluating potential candidates to succeed Powell, whose term ends in May 2026. If the Federal Reserve shifts to a more accommodative monetary policy, it would theoretically benefit risk assets, including Bitcoin.

Despite the strong net inflow of Bitcoin ETFs and the growing institutional demand, Bitcoin still closely correlates with the overall market performance.

(The 40-day correlation between Bitcoin and the S&P 500 index, source: Trading View)

The correlation between Bitcoin and the S&P 500 index is currently 68%, indicating that the price trends of the two assets are similar. This means that if the US stock market falls due to an economic recession or trade war, Bitcoin will also find it difficult to remain unscathed. The new import tariffs in the US are also an imminent risk that could harm corporate profits, especially in the technology sector that heavily relies on global trade.

NVIDIA became the world's most valuable company with a market capitalization of $4 trillion on Wednesday, and the company may be particularly susceptible to shocks. It remains to be seen whether the escalating trade tensions will lead to a significant fall in tech stocks. While raising the debt ceiling is usually favorable for risk assets, the threat of an economic recession may cause Bitcoin prices to retreat to $95,000.

However, Jack Mallers of Strike still believes that the possibility of Bitcoin maintaining its historical highs in 2025 is still completely present. But for now, traders seem to be worried about whether the AI-dominated tech industry can withstand the impending trade war.

Conclusion:

The continuous surge of U.S. debt and the warning signals from the real estate market undoubtedly cast a shadow over the global economy. Against this backdrop, the trend of Bitcoin has become more complex. On one hand, its potential as an anti-inflation asset appears more attractive under the expectation of fiat currency depreciation; on the other hand, its high correlation with traditional financial markets makes it difficult to completely escape the impact of economic recession.

Whether Bitcoin will fall back to 95,000 USD or even lower is still unknown. This will depend on the direction of the Federal Reserve's monetary policy, the depth and breadth of the U.S. economic recession, and the evolution of the global trade situation. For investors, maintaining caution, diversifying risks, and closely monitoring macroeconomic data and policy changes will be key to coping with challenges in a volatile market.