US federal debt has crossed $40 trillion, yet Bitcoin trades near $80,000, still roughly 37% below its record high. A new BloFin Research report argues the debasement trade hasn't failed — it has entered a second phase built around Treasury buybacks rather than Fed money printing.
US federal debt has crossed $40 trillion, and the deficit still sits close to 6% of GDP. Yet Bitcoin trades near $80,000, roughly 37% below its record high from last year. That gap is the puzzle BloFin Research set out to explain: if rising debt and weaker fiat money are supposed to lift scarce assets, why did Bitcoin spend much of 2026 falling?
The trade broke, then came back
The debasement trade rests on a simple idea: large deficits eventually create pressure for easier monetary policy, pushing investors toward scarce assets like gold and Bitcoin. That thesis weakened in early 2026, when Bitcoin fell below $62,000 and gold and silver also dropped sharply from their highs. BloFin links much of that unwind to the nomination of Kevin Warsh as Federal Reserve chair, since markets viewed him as less likely to lean on aggressive balance-sheet expansion to absorb fiscal pressure.
The bond market forced a response
The picture changed in August. On August 18, the 30-year US Treasury yield hit its highest level since 2007. A day later, the Treasury said it would at least double the size of its liquidity-support bond buybacks, from $2 billion to at least $4 billion per operation. Bitcoin then rose about 25% in August, while gold gained around 15%. The Treasury cannot print money, so it funds buybacks through cash, tax receipts, or new borrowing — a different mechanism from Federal Reserve quantitative easing. Still, according to BloFin: "Treasury buybacks are not QE."
Real yields still work against Bitcoin
US public debt sits around 101% of GDP, and the 2026 deficit is projected near $1.9 trillion, while M2 has returned to growth. Yet 10-year real Treasury yields remain around 2.4%, letting investors earn a strong inflation-adjusted return from bonds without taking crypto risk. That also helps explain why Bitcoin's 2026 path still resembles a familiar cycle: it peaked roughly 534 days after the April 2024 halving, close to the timing of the 2017 and 2021 highs, before falling by more than half and recovering.
BloFin's case gets stronger only if real yields start falling while fiscal pressure stays high — echoing the 1942-to-1951 period, when the Fed capped long-term Treasury yields at 2.5% to help finance wartime debt. Bitcoin does not need that exact scenario to repeat; it needs investors to believe governments will keep protecting the debt market from its own borrowing costs.
Source: BeInCrypto
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