US fiscal mathematics is drifting toward a threshold where markets can no longer be ignored, reaching levels relative to GDP that have not occurred since the last world war.
Washington’s latest budget projections suggest the United States is on track to accumulate about $64 trillion in federal debt over the next decade.
The Congressional Budget Office’s (CBO) latest 10-year outlook shows continued increases in state obligations.
CBO projects that the federal budget deficit for fiscal year 2026 will total approximately $1.9 trillion. That gap is expected to widen to $3.1 trillion by 2036.
These numbers would mean public sector debt would rise from about 101% of gross domestic product in 2026 to about 120% by 2036. That level exceeds the peak debt burden seen after World War II.
For investors around the world, the sheer size of the debt mountain is less of a concern than the cost of servicing it. CBO data shows interest costs are on track to become one of the government’s main line items. Annual net interest payments are expected to reach approximately $2.1 trillion by the mid-2030s.
The forecast comes as bearish sentiment against the US dollar has reached multi-year highs, creating a volatile macroeconomic backdrop that is increasingly consistent with long-term investment thesis for hard assets such as Bitcoin.
Bond Market Reality Check
While headline numbers grab attention, the U.S. Treasury market trades on a more direct mechanism.
As of February 12, the United States had approximately $38.65 trillion in debt, according to the Treasury Department’s Debt to the Penny dataset.
But the path from this level to the projected $64 trillion depends largely on how marginal dollars are financed. Amid policy uncertainty, investors are increasingly focused on the compensation required to hold long-term government bonds.
This compensation is manifested in the term premium, which is the additional yield investors demand for holding long-term bonds rather than rolling over short-term securities.
Term premiums can remain suppressed for long periods of time. But if it rises, long-term interest rates will rise even if the expected short-term policy rate remains unchanged.
This dynamic effectively increases the cost of maintaining national debt and tightens the fiscal position of the economy as a whole.
This is because long-term yields rise due to an increase in the term premium, which is not simply a reflection of inflation expectations, but is set as a risk premium against fiscal and regulatory uncertainty.
Notably, recent market commentary suggests that this change is afoot. Strategists expect long-term government bond yields to rise in the second half of 2026, according to a Reuters poll conducted Feb. 5-11.
Respondents cited persistent inflation, high debt issuance, and investor concerns about the direction of policy. The strategists also noted that a world with a flooded supply of government debt makes it much harder to keep the Federal Reserve’s balance sheet shrinking.
This means a “macro fork” that is important for the virtual currency market.
Even if the bond market demanded continued long-term premiums to absorb Treasury supply, the U.S. government would still be able to finance operations, but at the cost of higher borrowing rates across the economy.
Such a scenario increases political incentives to seek relief through alternative measures. These could include lower interest rates, regulatory incentives for captive buyers to purchase bonds, or greater tolerance for higher inflation.
These are classic elements of “financial repression,” a strategy that investors have historically associated with the outperformance of hard assets.
bet on dollars
At the same time, the foreign exchange market is also showing signs of concern.
The vulnerability of the US dollar is increasingly seen as a governance and credibility issue rather than a cyclical one.
Over the past year, the US dollar has fallen more than 10% due to President Donald Trump’s policies, marking its worst performance since 2017.
Reuters reported that market strategists widely expect the weakness to continue through 2026, citing potential interest rate cuts and growing concerns about central bank independence.
Additionally, some investors were beginning to reassess the dollar’s “automatic safe-haven” status amid geopolitical and policy instability.
This position confirms the change in sentiment towards the US dollar.
In fact, the Financial Times reported that fund managers are taking the most bearish stance on the dollar in more than a decade.
A Bank of America study cited in the report showed currency exposure is the lowest since at least 2012. The pessimism can be attributed to policy unpredictability and rising geopolitical risks.
However, the transition of the world’s foreign exchange reserves away from the dollar is delicate.
According to IMF COFER data, the dollar share of global allocated reserves stood at 56.92% in the third quarter of 2025 (slightly down from 57.08% in the second quarter).
This trajectory represents a slow drift rather than a collapse. This also implies that even though the dollar remains dominant in global financial plumbing, it may weaken in trading markets.
Diversification signals are most evident in commodity markets. The World Gold Council reports that central banks purchased 863 tonnes of gold in 2025.
Although this figure is below an exceptional year in which purchases exceeded 1,000 tonnes, it is still well above the average recorded between 2010 and 2021.
This sustained buying supports the view that public sector diversification is an ongoing structural trend.
Bitcoin macro pitch: 3 paths investors are considering
In current conversations, a secular bull market in Bitcoin is often framed as a hedge against degradation and policy discretion.
However, the more precise question is which macro regime the market will enter into. This is because each regime reshapes real interest rates, liquidity, and confidence in different ways.
One path is methodical sharpening. In this case, deficits remain high and issuance remains high, but inflation remains subdued and policy credibility remains. The dollar can fall without breaking the system, and bond auctions are cleared with small concessions as term premiums gradually rise.
In that world, Bitcoin tends to be traded primarily as a liquidity-sensitive risk asset. It could rise on headline downgrades, but remains tied to real yields and broader risk appetite.
The second path is a fiscal risk premium regime. Investors are demanding significant rewards for holding for the long term. Term premiums rise, yields steepen, and rising funding costs begin to feed back into politics.
Let’s move on from saying debt is big to saying debt is expensive. In such situations, rare asset transactions tend to perform better as investors seek hedges that are not debts to heavily indebted countries.
Gold’s public sector tenders bear out the similarities. Bitcoin’s fixed supply makes it more attractive to investors who see fiscal dominance as a direction, i.e. monetary policy constrained by debt repayments.
The third path is the dollar paradox. This is a twist that complicates the simple dollar-bear story in cryptocurrencies.
A Bank for International Settlements working paper published in February found that large inflows into dollar-backed stablecoins could reduce yields on three-month Treasury bills by approximately 2.5 to 3.5 basis points at double standard deviation flows.
This does not mean that stablecoins will solve long-term debt problems. That is, the growth of stablecoins could create marginal demand for short-term government bonds.
This is important because it allows cryptocurrencies to deepen dollarization through stablecoin rails while simultaneously supporting Bitcoin’s hedging story.
Bitcoin and stablecoins can power the same dollar-based payment infrastructure at a system level, while pulling in different directions at a story level.
What investors are watching next
For now, the $64 trillion forecast compresses years of fluctuations into a single number that will shock the world.
For crypto traders looking to map these stories into tradable signals, tells tend to show up in rates and confidence.
The first set of signals is within the rate complex. Investors will be watching for evidence that markets are charging a sustained risk premium to absorb long-term supply, and whether bid results begin to reflect stress that persists beyond a single news cycle.
A sustained rise in term premiums would indicate that uncertainty, not just inflation expectations, is factored into long-term yields.
The second set of signals is reliability. Headlines about central bank independence act like an accelerant, as they can turn a slow debt narrative into a more rapidly moving currency narrative.
As credibility shocks accumulate, asset value declines and debates over real assets tend to increase, even if the dollar prevails in reserves and payments.
The third set is the reserve drift and gold bid. COFER data shows a slow decline from 57.08% in Q2 2025 to 56.92% in Q3 2025, supporting the idea that de-dollarization is gradual. The central bank’s purchase of 863 tonnes of gold in 2025 confirms that public diversification continues, even in the absence of a bankruptcy.
The fourth set is stablecoin flows and paper money demand. If stablecoin growth continues to support demand for short-term government bonds, short-term funding activity could soften even as long-term debt trends worsen.
While this can buy time for the system, it also places a heavier burden of reliability and duration risk on the long end.
Taken together, this setup helps explain why Bitcoin continues to appear in macro-hedging strategies. We don’t need a dollar collapse. There is no need to suddenly change the reserve system.
It requires something more nuanced and easier for markets to trade, an increased suspicion of the future rules of money, combined with enough liquidity to keep hedging trades alive.
(Tag Translation)Bitcoin
