US debt tops $40T as Bitcoin trades near $80,000

U.S. federal debt has passed $40 trillion while Bitcoin trades near $80,000, roughly 37% below its record high. Analysts at BloFin Research report that the traditional “debasement” trade has shifted from expecting easier monetary policy to watching government actions to cap borrowing costs.

The debasement trade is the idea that large fiscal deficits will pressure central banks to ease policy, pushing investors into scarce assets such as gold and Bitcoin. BloFin Research described a “second phase” in which investors pay as much attention to how policymakers might limit long-term yields as they do to money creation.

The trade lost momentum in early 2026 after markets reacted to the nomination of Kevin Warsh for Federal Reserve chair. Markets viewed Warsh as less likely to use aggressive Fed balance-sheet expansion to absorb fiscal pressure. Bitcoin fell below $62,000 during that period and prices of precious metals retreated as expectations for monetary easing cooled. Fed officials later said the September policy decision would depend mainly on upcoming jobs and inflation data.

Market activity shifted again in August. On August 18 the 30-year U.S. Treasury yield reached its highest level since 2007. The U.S. Treasury then said it would at least double the maximum size of some liquidity-support buybacks in 10- to 30-year bonds, raising the cap from $2 billion to at least $4 billion per operation. Following those events, Bitcoin rose roughly 25% in August and gold gained about 15%.

BloFin Research wrote that the timing of buyback announcements after a surge in long-term yields suggested policymakers may be less willing to tolerate sustained higher borrowing costs. The firm also wrote, “Treasury buybacks are not QE.” Treasury buybacks must be funded by cash, tax receipts, or new borrowing and do not create bank reserves the way Federal Reserve purchases do.

U.S. public debt is near 101% of gross domestic product and the 2026 deficit is projected at about $1.9 trillion. Broad money measures have returned to growth. Ten-year real Treasury yields remain near 2.4%, which provides an inflation-adjusted return in government bonds without exposure to cryptocurrency.

BloFin drew a historical comparison to 1942–1951, when the Federal Reserve capped long-term yields at 2.5% to help finance wartime borrowing and real returns later turned negative as inflation rose. The research note said Bitcoin would not require an exact repeat of that era to benefit; it argued markets might begin to price an informal limit on yields if interventions follow repeated spikes.

Bitcoin’s price action in 2026 has followed a familiar cycle pattern: it peaked about 534 days after the April 2024 halving, fell by more than half, and then began a recovery. Market participants are watching whether long-term yields will decline while fiscal deficits remain high and whether any policy responses will affect the pricing of scarce assets.