A new report from Bank of America “BofA” Global Research cited by MarketWatch points out that the coronavirus crisis continues to wreak havoc on the U.S. economy, with a record $10.5 trillion in corporate debt to creditors.
The amount would be the largest in 50 years, and more than 68 percent of it is owed by corporations that have a AAA rating, a positive rating that signals hope of payment for their creditors. The rest, some $3.6 trillion, falls into the category of BBB credit ratings, a designation commonly known as junk bonds.
The report also notes that U.S. household debt is at an all-time high of $14.3 trillion during the pandemic, causing a decline in consumer spending that has directly affected businesses, whose problems could lead to bank fragility and the risk of massive losses due to the depletion of their resources.
Recall that the Federal Reserve had to intervene last spring to provide financial relief to many businesses to keep them afloat during the pandemic, including for the first time the purchase of debt by the Fed.
And as if that weren’t enough, last June the Fed reported that companies recalled loans and issued corporate bonds at an annualized rate well above the previous quarter’s annualized rate – up to nine times – something not seen since 1946.
Bitcoin Could Take Advantage of the Outlook
The gray picture about businesses is far beyond what many creditors thought before the pandemic began and is certainly a key point that calls into question the entire traditional reserve market system for businesses.
With the dollar becoming weaker and the rhetoric more in favor of assets less prone to manipulation by the state, businesses have begun to feel the need to look for other value reserve alternatives in order to cushion the consequences of the pandemic.
This is why strategies of companies like Microstrategy, for example, to buy Bitcoin as part of their reserves, shows that Wall Street companies are considering using the decentralized asset as a hedge against the uncertainties in the traditional stock market, motivated by the quantitative expansion policies that many central banks are currently executing.
We have already seen that American consumers have been prone during this pandemic to seek out Bitcoin as a safe haven asset because of its accessibility, above even traditional gold.
Last April when the government issued the stimulus checks to the public, Coinbase almost immediately saw an increase in BTC purchase orders for $1,200, the exact amount of the checks.
Now with a growing debt, companies owing to their creditors and a pandemic that is not ending, it is not surprising that retail adoption has mutated into institutional adoption, with some companies pushing the adoption of Bitcoin as a safe haven asset and even financing to meet their obligations, taking advantage of the characteristic volatility of the digital asset.