After the total U.S. federal debt surpassed $40 trillion, the market once again turned its attention to Bitcoin and gold. Robbie Mitchnick, Head of Global Digital Assets at BlackRock, stated that what may truly impact Bitcoin’s medium- to long-term valuation is not the progress of cryptocurrency legislation, but the U.S. government’s continuously growing debt and fiscal deficit.
Debt surpasses $40 trillion
U.S. Department of the Treasury data shows that federal debt rose to approximately $40.05 trillion on August 18, less than five months after surpassing $39 trillion. Of this, approximately $32.3 trillion is held by the public, and another $7.8 trillion is held internally by the government.
Mitchnick believes that debt and deficits are once again becoming a focus for markets. When investors begin to worry about the purchasing power of fiat currencies, they typically reassess the allocation value of scarce assets, benefiting Bitcoin and gold.
Deficits and interest expenses continue to rise.
The Congressional Budget Office projects that the federal deficit will reach $1.9 trillion in fiscal year 2026. Under current law, annual deficits could expand to $3.1 trillion by 2036, accounting for 6.7% of GDP.
The government's financial report also shows that net interest spending for fiscal year 2025 is approximately $970 billion. Maintaining high interest rates will increase the cost of refinancing existing debt and may further elevate future borrowing needs.
Bitcoin is more driven by fiscal expectations.
During last week's market rebound, Bitcoin posted one of its strongest three-day gains since 2023, rising from just above $60,000 to nearly $80,000 before giving back some of those gains and remaining below $80,000.
Mitchnick believes that Bitcoin’s strength during a period of stock market pressure and increased bond market volatility indicates it does not fully align with traditional risk assets. BlackRock has previously described Bitcoin as a scarce, decentralized alternative to money.
He also noted that the upcoming U.S. CLARITY Act could benefit the broader cryptocurrency market, but may not have a significantly greater impact on Bitcoin itself. In contrast, decentralized finance, trading platforms, and tokens with still-contested regulatory classifications may rely more heavily on future legislation governing market structure.