U.S. federal debt has reached an all-time high of $39.7 trillion, and investors appear to be moving back into Bitcoin on fears the dollar will be devalued. Bitcoin traded around $65,000 on July 27 as the so-called debasement trade returned.
Investors appear to be turning back to Bitcoin amid rising fears that the U.S. dollar will become devalued in the coming months and years. The U.S. Treasury Department announced on July 24 that the federal government’s debt stands at an all-time high of $39.7 trillion. That debt is growing by $7 billion each day.
The debasement trade returns
New figures showing the government more indebted than ever have raised concerns that the dollar, the world’s reserve currency, could become devalued. The debt situation has reignited the so-called “debasement trade”, a bet that the dollar will fall in value.
Many investors are responding by buying limited-supply assets — Bitcoin, the largest cryptocurrency by market capitalization, and the precious metal gold. Bitcoin traded right around $65,000 on July 27. Crypto Briefing puts its recent range between $64,800 and $65,500.
Apollo economist warns of little fiscal buffer
A growing number of economists and market observers are raising the alarm over the swelling U.S. debt, particularly with America mired in a costly war in Iran. Apollo Chief Economist Torsten Slok recently warned that a U.S. debt-to-GDP ratio of over 120% means there is little room to spend more money should a recession hit.
Slok wrote in a blog post: “The U.S. has never entered a recession with this little fiscal buffer.”
Deficits projected at $1.9 trillion for fiscal 2026
Crypto Briefing reports that fiscal deficits are projected to reach $1.9 trillion for fiscal 2026. The outlet also cites the LondonCryptoClub team, which expects the debasement narrative to strengthen as debt acquisition accelerates.
Therefore, a growing number of analysts say the U.S. debt is triggering demand for assets that fall outside the traditional financial system, such as Bitcoin. That could bode well for a rebound in the entire cryptocurrency sector, say some analysts. According to Crypto Briefing, institutional holders have already begun treating Bitcoin as treasury reserves.
Sources: CryptoProwl, Crypto Briefing
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