In early 2026, the United States saw its public debt reach an unprecedented $38.5 trillion, marking the highest level in the nation’s history. This immense obligation, owed to both domestic and foreign creditors, now far surpasses the annual productive capacity of the American economy. With the debt-to-GDP ratio exceeding 120%, financial markets interpret this not only as a fiscal risk but also as a structural signal shaping asset prices. In this environment, alternative investments like Bitcoin and gold are once again taking center stage.
The Dynamics of U.S. Debt
Of the total $38.5 trillion debt, approximately 70% is held by domestic creditors, with the remainder in the hands of foreign investors, notably from Japan, China, and the United Kingdom. The striking aspect is the comparison of this figure with the economy’s productive capacity. Against a GDP of about $30 trillion, the debt level implies that for every $100 of income, there is more than $120 in debt.
The current momentum in borrowing was largely propelled by aggressive fiscal expansion policies during the pandemic period. In the subsequent years, infrastructure investments, defense spending, and social programs have persistently elevated the debt stock. Annual interest payments have now exceeded $1 trillion, surpassing the defense budget. This situation rekindles debates on fiscal sustainability while narrowing the Federal Reserve’s monetary policy options.
As the debt level rises, the U.S. Treasury faces the inevitability of borrowing at higher interest rates. Long-term bond yields are under upward pressure while political and economic expectations grow for keeping short-term rates low. As a result, the U.S. yield curve is steepening significantly, with financial assets being repriced according to this new equilibrium.
Bitcoin, the Dollar, and Discussions on “Fiscal Dominance”
Amidst the relentless rise in U.S. debt, the indirect pressure on central banks from governments becomes more apparent. U.S. President Donald Trump openly suggested a rapid reduction of interest rates to 1%, reinforcing the view that low-interest policy would limit debt servicing costs. This approach is seen as indicative of the process termed “fiscal dominance” in markets.
Former Treasury Secretary and Fed Chair Janet Yellen highlighted that increasing debt could force monetary policy to focus more on easing the interest burden than controlling inflation. In such an environment, central banks support market liquidity by purchasing short-term bonds. Analysts suggest that this leads to a rise in long-term interest rates while short-term rates are suppressed.
The scenario is distinctly positive for the cryptocurrency market. Bitfinex analysts noted that a steepening yield curve and a structurally weakening dollar are rewarding assets with intrinsic value. Gold’s surge by up to 60% last year is seen as a tangible reflection of concerns over the dollar’s devaluation. Historical patterns indicate that as a currency’s purchasing power declines, investors turn to alternatives. Market actors agree that a similar pricing process will accelerate for Bitcoin.
