Elon Musk Warns His Dollar Plans Could Slow Bitcoin Price Growth: Here’s Why

Musk will lead the newly created White House advisory office called DOGE

It’s a play on the Texas techno king’s love for Dogecoin and an acronym that stands for Department of Government Efficiency.

DOGE aims to reduce inflation now

Either fix this or go bankrupt de facto https://t.co/hmjpx6uBfd

— Elon Musk (@elonmusk) December 26, 2024

The magnetic technology engineer has advised former and future President Trump on a range of technology, business and public policy issues.

His ideas for greater government efficiency could help reduce overspending in Washington, DC, slow the growth of the federal budget deficit, and help curb price increases throughout the economy due to inflation.

High deficits cause inflation, as government spending increases the velocity of money in the economy and raises prices. Meanwhile, new dollars created by the Federal Reserve and lent to banks to buy government debt inflate the dollar and also raise prices.

A recent study by Princeton University’s Department of Economics estimates that US budget deficits in 2021 caused about 30% of US dollar inflation in 2021-22.

The rise in prices as a result of big spending in Washington starts in the financial markets, then spreads throughout the economy until they drive up prices at the gas pump and at the grocery box.

New Headwind for Bitcoin Price, Musk Warns

If dollar inflation is resolved, the dollar price to buy cryptocurrency will fall, other things being equal.

What matters is the ratio of dollars to crypto.

— Elon Musk (@elonmusk) January 7, 2025

The effect is particularly dramatic in the crypto markets and shows up prominently in the price of Bitcoin and other major token pools such as ETH, XRP, SOL and DOGE.

In fact, many cryptocurrency investors say they favor crypto assets like Bitcoin, Ripple, and Dogecoin as a safe haven for their savings from dollar inflation.

While not all experts agree that Bitcoin is a hedge for dollar inflation, over any four-year period, money held as BTC has markedly increased purchasing power, while the inflated dollar loses its purchasing power parity.

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

That’s because lower deficits and lower inflation will curb rising prices across the board, including traditional financial markets like stocks and Internet financial instruments like Bitcoin.

Bitcoin price corrected to a low of $94,600 on Wednesday after missing the $100,000 mark on Tuesday.

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