U.S. Debt Approaching $40 Trillion: Fuel for the Next Bitcoin Cycle?

Nearly $3 billion a day to pay interest. The U.S. federal debt is now approaching $40 trillion, while rising rates gradually increase its refinancing costs. This trajectory fuels demand for gold and bitcoin, though it does not guarantee their short-term rise. Here’s an overview of what is known as the debasement trade.

Key Points

• U.S. gross debt is nearing $40 trillion, up from $38 trillion in the fall of 2025.
• Net interest exceeds $1 trillion per year, more than the defense budget.
• Nearly $9 trillion in securities to refinance this year, mostly in the short term.
• The debasement trade benefits gold and bitcoin, but liquidity crises hit crypto first.

The U.S. Debt Enters the Era of $40 Trillion

The gross federal debt stood at about $39.8 trillion at the end of July. It was only $37 trillion in the summer of 2025, before surpassing $38 trillion in the fall. Its legal ceiling, raised by $5 trillion in July 2025, is now set at $41.104 trillion.

This increase stems from structural deficits. The budget deficit reached $432 billion for the month of July alone and $1.799 trillion since the beginning of fiscal year 2026. The Congressional Budget Office (CBO) forecasts an annual deficit of $1.9 trillion, or 5.8% of GDP, and $3.1 trillion by 2036.

The interest burden amplifies the phenomenon. The CBO estimates it at just over $1 trillion in 2026, up from $970 billion in 2025. This represents about $2.8 billion a day, exceeding the $898 billion allocated to defense in its baseline projection.

However, the pressure comes not only from the volume of debt but also from its renewal. At the end of June, the Treasury accounted for $31.1 trillion in negotiable securities, of which about $10.1 trillion would mature within a year. These loans will need to be replaced under market conditions.

The Debasement Trade or Why This Trajectory Interests Bitcoin

The yield on the 30-year Treasury bond is thus above 5.2%, while the 10-year yield approaches 4.7%. These rates gradually increase the federal bill, as well as the cost of mortgages and corporate financing.

And the accumulation of debt fuels the debasement trade, which involves favoring assets perceived as scarce against currencies whose supply can increase. Gold historically benefits from this reasoning. Bitcoin adds a maximum supply set by its protocol at 21 million units.

However, the comparison has its limits. The rise in debt does not automatically trigger an increase in BTC. If investors demand higher yields on U.S. bonds, the liquidity available for risky assets may decrease. Bitcoin thus plummeted during the liquidity crisis of March 2020 and again during the monetary tightening of 2022.

In the long term, however, deficits and rising interest rates strengthen Bitcoin's monetary argument. And even if, in the short term, high real rates and massive Treasury issuance can produce the opposite effect, U.S. debt participates -- albeit reluctantly -- in the narrative of scarcity surrounding bitcoin.

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