Bitcoin jumps 27% as $40 trillion debt fuels fiscal-fear trade

Bitcoin jumped 27% to $79,500 in the week through Aug. 21 after the U.S. Treasury doubled its long-dated bond buyback program and national debt crossed $40 trillion for the first time.

"The more Bessent tries to push back, the more markets will push against him," Marc Ostwald, chief economist at ADM Investor Services International, said, describing the intervention as pushing investors toward gold and bitcoin on fears of currency debasement.

The Treasury raised the maximum per-operation size for its liquidity support buybacks from $2 billion to at least $4 billion for 10-to-30-year securities, effective Sept. 9. The 30-year yield dropped 9 basis points in the hours after the announcement, the dollar index fell to its lowest since June, and gold climbed 2.1%. Spot bitcoin ETFs absorbed $1.9 billion in net inflows over four days, with BlackRock's iShares Bitcoin Trust (IBIT) capturing $606 million on Aug. 20 alone, an 82% share.

The buyback compresses long-term yields, weakening the dollar and lowering the opportunity cost of holding non-yielding assets. With the expanded schedule launching Sept. 9 and the CLARITY Act facing a Sept. 15 cloture vote, bitcoin's next test is whether it can hold above $75,000 after $3 billion in short liquidations.

The $40 trillion backdrop

U.S. national debt reached $40,047,425,768,420.22 on Aug. 18, five months after passing $39 trillion — the fastest trillion-dollar increase in the country's history. The federal government spends roughly 40% more than it collects, with interest payments surpassing Medicare as the second-largest budget item. The day the debt clock crossed $40 trillion, the Treasury's 20-year auction drew tepid demand, forcing a higher yield to clear the sale. One day later came the buyback expansion.

The transmission to bitcoin runs through three channels. Lower yields reduce the opportunity cost of holding non-yielding assets. Dealers selling older bonds to the Treasury receive cash that redeploys into equities and crypto. And the buyback shows a policy preference: the government will choose monetary expansion over austerity when forced to pick.

Ray Dalio, founder of Bridgewater Associates, called the buyback "a sign that a debt crisis is getting closer" in an Aug. 21 LinkedIn post, recommending investors hold 10% to 15% in gold and "a bit" of bitcoin. He projected U.S. debt reaching $55 trillion to $60 trillion within a decade. The bitcoin-gold correlation rose to roughly +0.7 during the week, a level analysts described as a return to "digital-gold-era" pricing.

What to watch

The expanded buyback schedule takes effect Sept. 9. Watch whether the Treasury increases operation sizes beyond $4 billion, which would confirm Treasury Secretary Scott Bessent's hint that the ceiling could rise. The Sept. 15 CLARITY Act cloture vote is the next regulatory milestone — Polymarket traders give the bill a 16% chance of becoming law in 2026, down from an 82% peak in February. A failed vote could trigger a 15% to 30% correction, analysts have warned.

Bitcoin remains 37% below its all-time high of $126,198 set Oct. 6, 2025. The rally was amplified by leverage — more than $3 billion in short positions were liquidated across derivatives exchanges, affecting 170,237 traders, with Binance processing over $1 billion. If the 30-year yield climbs back above 5.20%, the buyback program is failing to contain the bond market and risk assets face pressure. If it falls below 4.90%, the fiscal-hedge trade strengthens.

This article is for informational purposes only and does not constitute investment advice.