$40T Debt Milestone Fails to Boost Bitcoin Price

The US federal debt has surpassed $40 trillion for the first time, reaching approximately $40.05 trillion on August 18-19, according to Treasury data.

This milestone marks a doubling of the debt since 2017 and has sparked discussions about the debasement trade. The core bull case suggests that as governments accumulate massive debts, they may resort to inflationary policies to erode their obligations, making dollars less valuable but increasing the appeal of assets with limited supply, such as Bitcoin.

Bitcoin's fixed ceiling of 21 million coins makes it an attractive option in this scenario. Gold has also been rising alongside these debt milestones, reflecting investor concerns about government finances and inflation risks.

Despite the narrative support for Bitcoin, its price has not yet responded significantly to the $40 trillion milestone. US Treasury bonds still offer meaningful real yields, making them more attractive than non-yielding assets like Bitcoin or gold. Competing forces are at play, including Treasury buybacks, yield curve movements, and liquidity conditions.