- US debt surpassed the $40 trillion mark, while real Treasury bond yields for the 30-year maturity neared 3%.
- Grayscale believes rising US debt could increase demand for Bitcoin, Ethereum, and Zcash.
- Ray Dalio warns of the possibility of a US debt crisis within approximately the next three years.
Details:
The U.S. Treasury Department recently announced an expansion of long-term bond repurchase operations in the open market, aimed at reducing the supply of risk-adjusted debt. Grayscale linked this move to growing interest in crypto assets, noting that unchecked government borrowing could weaken the credibility of fiat currencies and increase demand for alternative stores of value.
Grayscale identified three cryptocurrencies that could benefit from what it calls a “currency value erosion trade”: Bitcoin, Ethereum, and Zcash. The warning came after U.S. public debt surpassed $40 trillion for the first time, and after the real yield on 30-year Treasury bonds rose to around 3%.
According to data from Bloomberg and Grayscale, U.S. debt has risen almost steadily since the global financial crisis—dropping below $10 trillion in 2006 to roughly $40 trillion today, with growth accelerating after 2020.
Grayscale also compared the current situation to the post–financial-crisis period, when private borrowing declined while government debt continued to expand. Now, the firm believes that private borrowing (tied to the capital expenditure cycle for artificial intelligence) is rising alongside ongoing government borrowing, putting pressure on long-term interest rates. Grayscale included physical gold alongside selected cryptocurrencies among the assets investors may turn to, but described this as its view rather than a certain market outcome.
Warning from Ray Dalio:
For his part, investor Ray Dalio warned that the United States could face a major debt crisis within a few years, likening the potential turmoil to an “economic heart attack.” He cited a bond-repurchase operation worth $4 billion, rising bond yields, a weak dollar, and Japan’s sale of U.S. Treasuries. Dalio estimated the crisis could occur within three years (plus or minus two) if policies are not changed.
It said that this year the U.S. budget deficit could reach about $2 trillion, while the Congressional Budget Office estimates the 2026 deficit at roughly 6% of GDP (about $1.9 trillion). Dalio suggested narrowing this gap to around 3% of GDP through a combination of spending cuts, lower interest rates, and higher tax revenues.
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Note: This is general news content and does not constitute financial or investment advice.