U.S. federal debt exceeded $40 trillion for the first time on Wednesday, intensifying debate over the implications for Bitcoin as a non-sovereign asset with a fixed supply. The milestone comes as interest costs on the debt surpassed Medicare to become the second-largest federal expenditure after Social Security in the first 10 months of fiscal 2026, according to Reuters data.
The debt surge coincided with a Treasury effort to stabilize bond markets after long-term yields reached their highest levels since 2007. Treasury Secretary Scott Bessent announced plans to double buybacks of 10- to 30-year debt to at least $4 billion per operation, a move that initially pushed long-term yields and the U.S. dollar lower. Bitcoin surged alongside gold, with the cryptocurrency trading near $72,600 on Thursday, up roughly 6% over the past 24 hours and 15% over the past week, according to CoinGecko.
Analysts cite multiple factors behind Bitcoin’s rally, including expectations of more favorable U.S. crypto policy following a White House meeting between President Donald Trump and industry executives. However, market participants also point to fiscal conditions as a key driver. JC Parets, founder of TrendLabs, noted that Treasury’s buyback program was interpreted as an attempt to curb rising long-term borrowing costs, which could influence investor allocations across asset classes, including Bitcoin.
Dean Chen, an analyst at Bitunix, cautioned that while the debt milestone and buybacks provided short-term support, persistent fiscal deficits and expanding financing needs could ultimately drive borrowing costs higher again. He emphasized that Bitcoin’s near-term trajectory would likely hinge on broader financial conditions, including the strength of the U.S. dollar, long-term Treasury yields, and inflation expectations.
Some analysts adopt a longer-term perspective, arguing that sustained growth in U.S. debt could bolster Bitcoin’s appeal as a hedge against currency debasement. A team at DeFi protocol Yield Basis suggested that Bitcoin’s fixed supply and lack of a sovereign issuer may position it as a protective instrument alongside traditional assets like gold, though its potential to emerge as a new reserve asset remains uncertain.
