US federal debt has crossed $40 trillion for the first time, reigniting debate over whether mounting government borrowing could strengthen Bitcoin's case as a scarce, non-sovereign asset. The total has roughly doubled in under a decade. Bitcoin, launched in 2009 in the aftermath of the 2008 financial crisis, is capped by its protocol at 21 million coins — a hard cap that, unlike the US debt ceiling, cannot simply be legislated higher.

Interest costs on that debt have climbed as well: in the first 10 months of fiscal 2026, they surpassed Medicare to become the federal government's second-largest budget expense, behind only Social Security, according to Reuters.

The milestone coincided with a Treasury intervention aimed at calming a bond selloff that had pushed long-term yields to their highest levels since 2007. Treasury Secretary Scott Bessent announced Wednesday that the department would double its buybacks of 10- to 30-year debt — operations in which the Treasury repurchases outstanding longer-dated securities from the market — to at least $4 billion per operation. The move initially pushed yields and the US dollar lower, while Bitcoin (BTC) and gold rallied.

Bitcoin continued to surge on Thursday morning, trading around $72,600 — up roughly 6% over the past 24 hours and 15% over the past week, according to CoinGecko data (Source: Yahoo Finance). US spot Bitcoin exchange-traded funds, which began trading in January 2024, have since opened a regulated channel for traditional investors to gain exposure to the asset, with their daily flows widely tracked as a gauge of demand.

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Treasury buybacks add another potential Bitcoin catalyst

Bloomberg and others attributed part of Bitcoin's rally to optimism over friendlier US crypto policy following President Donald Trump's meeting with industry executives at the White House on Wednesday. The session followed earlier administration moves embracing the sector, including a March 2025 executive order establishing a Strategic Bitcoin Reserve. Market analysts, however, also pointed to the Treasury's actions and broader fiscal conditions as additional factors.

TrendLabs founder and chartered market technician JC Parets highlighted the Treasury's decision to step up purchases of longer-term government bonds, a move he said bond-market participants viewed as an effort to push back against rising long-term rates. Parets said:

"If the market believes the government is going to push back against rapidly rising long-term rates, that can change the math for everything else investors own. Including Bitcoin."

Bitunix analyst Dean Chen offered another view, saying the debt milestone is not inherently bullish for Bitcoin. Treasury buybacks temporarily lowered long-term yields and weakened the dollar, he noted, but persistent deficits and growing financing needs could eventually push borrowing costs higher again.

In Chen's assessment, Bitcoin's near-term direction will depend more on broader financial conditions, with US dollar strength, long-term Treasury yields and inflation expectations the key variables to watch.

Analysts at DeFi protocol Yield Basis took a longer-term view, telling Cointelegraph that continued growth in US debt could strengthen demand for Bitcoin as a hedge against currency debasement, given its fixed supply and lack of a sovereign issuer. They said:

"Whether it will actually become a new reserve asset remains to be seen, but as concerns around fiat currency debasement grow, it will definitely stand out more as a straightforward protective instrument (alongside more traditional assets like gold)."

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