US debt passes $40T, reigniting debate on Bitcoin's role as hedge

US federal debt has surpassed $40 trillion for the first time, prompting fresh discussion about whether spiralling government borrowing could support Bitcoin's long-term narrative. Interest costs have risen sharply, now the second-largest federal budget item after Social Security in the first ten months of fiscal 2026.

Treasury Secretary Scott Bessent announced plans to double buybacks of longer-term government debt to at least $4 billion per operation, aimed at stabilising a bond selloff that has pushed yields to levels unseen since 2007. The move initially reduced yields and dollar strength, coinciding with Bitcoin rallying to around $72,600—up roughly 6% in 24 hours and 15% over the week.

Analysts offered differing interpretations. Some attributed the rally partly to optimism around more favourable crypto policy following the incoming administration's engagement with industry leaders. Others pointed to Treasury operations and fiscal pressures as drivers. One analyst flagged the Treasury's bond-buying effort as market participants' attempt to resist rising long-term rates; another cautioned that the debt milestone itself is not necessarily bullish for Bitcoin, since persistent deficits could eventually push borrowing costs higher regardless of temporary interventions.

Observers identified near-term drivers as key: dollar strength, Treasury yields and inflation expectations will likely shape Bitcoin's direction in coming weeks, even as some see the growing debt burden as potentially bolstering longer-term demand for a fixed-supply, non-sovereign asset.