Elon Musk Warns His Dollar Plans May Slow Bitcoin Price Growth: Why?

Musk heads a newly created White House Counsel Office called DOGE.

The techno king of Texas is a play on an acronym that represents his love for Dogecoin and government efficiency.

DOGE aims to beat inflation now.

Either we fix this or we get sued for the truth.

— Elon Musk (@elonmusk) December 26, 2024

The Magnetic Tech engineer has advised the one-time and future President Trump extensively on a wide range of issues related to technology, business and public policy.

His proposals for greater government efficiency would help reduce excessive spending in Washington, D.C., slow the growth of the federal budget deficit, and curb inflationary pressures on the economy.

A large deficit causes inflation because government spending reduces the velocity of money in the economy and causes inflation. Meanwhile, the new dollar created by the Federal Reserve and loaned to the banks saw an increase in the dollar and an increase in prices.

A recent study by Princeton University's Department of Economics estimates that the US budget deficit will account for 30 percent of US dollar inflation in 2021-22.

The inflation caused by Washington's big spending starts in the financial markets, then drives the economy until they raise prices at the gas pump and the grocery check.

New Headwind for Bitcoin Price, Musk Warns

If dollar inflation is resolved, the dollar value of cryptocurrency purchases will certainly decrease, other things being equal.

The main thing is the ratio of dollars and crypto.

— Elon Musk (@elonmusk) January 7, 2025

The impact is particularly dramatic on crypto markets and is evident in the price of Bitcoin and other major token pools such as ETH, XRP, SOL and DOGE.

In fact, many cryptocurrency investors say they choose crypto assets like Bitcoin, Ripple and Dogecoin as a hedge against dollar inflation.

While not all experts agree that bitcoin is a hedge against dollar inflation, in any four-year period when the purchasing power of the currency held as BTC increases significantly, the relative greenback loses its purchasing power.

But Musk warned on Tuesday in the X response thread that if the plans of the DOGE office succeed, it will represent a headache for the price of Bitcoin, not support for growth.

This is because lower defaults and less inflation reduce price increases across the board, in traditional financial markets like stocks and Internet financial instruments like Bitcoin.

After missing the $100,000 mark on Tuesday, the price of bitcoin fell to $94,600 on Wednesday.