$40 Trillion U.S. Debt Sparks Bitcoin and Gold Rally; BlackRock Weighs In

Article by Billy Bambrough, Forbes Digital Assets

Translated by AididiaoJP, Foresight News

Bitcoin, which surged sharply earlier this month due to sudden market "panic" sentiment, has recently lost momentum. Its price remains approximately 40% below its October 2025 high. Even as BlackRock, the world’s largest asset manager, revealed an unexpected shift in stance, Bitcoin has remained weak overall in 2026.

Currently, traders are shifting their focus back to broader macroeconomic concerns as they await the potential upheaval that a Bitcoin ETF might bring: Is the U.S. sliding into a debt spiral worth approximately $40 trillion? According to multiple investors and institutions cited in the article, if this narrative gains momentum, the primary beneficiaries may not be U.S. Treasuries themselves, but rather Bitcoin and gold.

In Silicon Valley investment circles, the U.S. debt crisis is no longer just described as "too large"—it has entered a self-reinforcing phase.

Tech investor Chamath Palihapitiya gave a fairly straightforward threshold on the podcast "All In," which he co-hosts with Jason Calacanis, David Sacks, and David Friedberg:

If you see the 30-year Treasury yield reach 6%, that’s the beginning of a death spiral.

This statement is frequently cited because it translates abstract fiscal risks into a price that the market sees every day. A rise in the 30-year U.S. Treasury yield means long-term funding is more expensive; for the U.S. federal government, which already carries approximately $40 trillion in debt, even a few basis points increase in financing costs can amplify interest expenditures by trillions.

Friedberg specified the issue further, warning that higher interest rates will soon make it harder to roll over this $40 trillion debt:

The federal government has a problem: it must refinance $10 trillion in debt over the next 12 months. These bonds are maturing soon—principal must be repaid to holders, and then the government must return to the Treasury market to issue new bonds and borrow again to roll over the debt. Right now, the U.S. federal government is borrowing at very high costs due to persistent inflation.

This is the classic path of a "death spiral": deficits drive up bond issuance, bond issuance pushes up yields, higher yields increase interest payments, and those interest payments in turn widen the deficits. Once markets begin to doubt whether the U.S. can roll over its maturing debt at an acceptable cost, buyers will demand higher compensation, and the spiral will begin to feed on itself.

Earlier this month, U.S. Treasury Secretary Scott Bessent announced intervention aimed at lowering bond yields and reducing government borrowing costs. The news sent shockwaves through international markets. While the government’s direct involvement to improve long-term liquidity was intended to "cool down" the Treasury market, it was immediately interpreted by some investors as a sign that the government has begun to care about the high cost of borrowing.

Billionaire investor Stanley Druckenmiller immediately countered. His core assessment is firm: only by reducing government borrowing can long-term bond yields be genuinely and sustainably lowered. In other words, technical interventions, buybacks, or liquidity arrangements can at best provide temporary relief but cannot resolve the fundamental imbalance between supply and demand.

Earlier this year, Duquesne also made a longer-term assessment: due to the United States’ rapidly growing $40 trillion debt, the dollar will no longer be the global reserve currency within 50 years and may be replaced by Bitcoin or other cryptocurrencies. He emphasized that the $1.8 trillion deficit must be addressed, as “this is the only way to sustainably lower long-term bond yields.”

On one side, the Treasury is trying to push down long-term interest rates; on the other, established macro investors insist that borrowing less is the right path. These two positions clashing naturally intensifies market discussions about the credibility of the dollar and the supply and demand for U.S. Treasuries.

Concerns are not just theoretical. U.S. Treasury data shows that the federal budget deficit reached $432 billion in July. According to Reuters, this is the largest monthly deficit since March 2021 and has pushed the total budget shortfall for fiscal year 2026 to approximately $1.8 trillion.

For traders, the impact of this data isn’t just about “another month of losses”—it’s how it overlaps with the refinancing schedule: approximately $10 trillion in debt needs to be rolled over in the next 12 months, while interest rates remain unfavorable for borrowers and deficits continue to hit monthly record highs. The market will naturally ask the next question—who will buy all this new debt, and at what price will buyers demand it?

Bitcoin saw a significant rebound in August, with the article attributing part of this rise to growing concerns over the U.S. debt burden of approximately $40 trillion. In other words, alongside ETF inflows and trading sentiment, this rally also reflected a longer-standing macro narrative: when faith in fiat currency weakens, capital seeks assets with a hard supply cap.

The most closely watched statement came from Robert Michne, BlackRock’s Head of Crypto Assets, to CNBC:

"Debt and deficit levels are the market's primary concern," he added, noting that when these concerns reappear in the headlines, assets like Bitcoin and gold often benefit.

This is not a slogan from the retail sphere, but rather the view of the head of the world’s largest asset management firm’s crypto business, who places Bitcoin alongside gold in the same category of assets for hedging fiscal pressures. Earlier this month, Michnik also described Bitcoin’s recent decoupling from the stock market as “healthy,” as it serves as a diversification tool to hedge against certain “left-tail risks” in investment portfolios.

Institutional holdings give this statement added weight. BlackRock’s leading Bitcoin ETF has held nearly 750,000 bitcoins—valued at nearly $50 billion—since its launch in early 2024. For many traditional investors, buying Bitcoin no longer requires managing private keys; an ETF provides a straightforward channel that turns “macro hedging” into an investable asset.

Simon-Peter Masabni, Head of Business Development at XS.com, explained in the email why the market links Treasury intervention with Bitcoin’s price rise: Bassett’s measures aim to improve liquidity in the longer-term debt market and alleviate pressure pushing U.S. Treasury yields to levels not seen in years.

However, some market participants interpreted these measures as an effort to curb borrowing costs, reigniting concerns about potential dollar depreciation. This environment favors Bitcoin—its fixed supply cap of 21 million coins continues to reinforce its narrative as a scarce asset relative to fiat currencies.

The logic chain is thus completed by the market: excessive deficits → maturing debt needs to be rolled over → high interest rates make rollovers more expensive → authorities intervene to suppress yields → some worry this is eroding the dollar’s credibility → capital flows into gold and bitcoin.

What the article aims to emphasize is not merely that "Bitcoin has risen," but that the pricing framework may be shifting. Over the past few years, Bitcoin has often moved in tandem with U.S. equities, particularly high-risk tech stocks; once it decouples from the stock market, institutions begin to view it as a hedging instrument within their portfolios. Michnik’s notion of "healthy" refers precisely to this shift in role.

Gold is no stranger to this narrative—it has long been a traditional asset used to hedge against currency depreciation and eroding sovereign credit. Bitcoin is positioned alongside it based on two factors: its fixed supply of 21 million coins, and its integration into mainstream portfolios through ETFs by Wall Street. BlackRock, managing products holding nearly 750,000 bitcoins, has publicly stated that when debt and deficits return to the headlines, both Bitcoin and gold could benefit—this psychological impact on the market often outweighs the target prices set by individual analysts.

Of course, the original text does not make a precise prediction that "Bitcoin will definitely rise to a certain price," nor does it present the death spiral as an already completed fact. Instead, it documents a set of increasingly heated assessments: if 30-year U.S. Treasuries approach 6%, Silicon Valley investors believe the spiral has begun; approximately $10 trillion in refinancing over the next year makes it easier for interest payments and deficits to feed off each other; Treasury intervention has sparked debate over whether it is aimed at protecting financing costs; and BlackRock has directly connected this macroeconomic thread to Bitcoin and gold.

For Chinese readers, the core of this news lies not in the sensational words in the headline, but in three sets of figures already on the table: approximately $40 trillion in outstanding debt, about $10 trillion in refinancing over the next 12 months, and a deficit of $432 billion for July alone and approximately $1.8 trillion year-to-date. As long as these three sets of figures continue to worsen, the narrative of Bitcoin and gold as “scarce assets” will be repeatedly revived by institutions.