The Acceleration of the U.S. Debt Spiral: Under a $38 Trillion National Debt Crisis, Bitcoin and Encryption Assets Become Core Hedging Tools | In-Depth Analysis

As U.S. national debt surged by $1 trillion in 48 days, approaching a historical high of $38 trillion, Elon Musk’s previous warnings about fiscal deficits are becoming a reality. This article provides an in-depth analysis of the root causes of the debt crisis — is it a matter of interest rates or uncontrolled spending? It further explores how crypto assets (Bitcoin, Ethereum, and Decentralized Finance) are transforming from speculative assets into structural hedging tools against the collapse of the fiat system, offering macro trend insights for crypto investors.

1. Record Debt Growth: Daily Fiscal Deficit of $21 Billion

Latest data shows that since August 11, U.S. Treasury bonds have surged by another $200 billion, with a fiscal deficit of $291 billion in July alone, the second-highest historical level for the same period. The deficit for fiscal year 2025 is expected to increase by 7.4% year-on-year, projected to surpass $1.63 trillion and move towards $2 trillion. This growth rate translates to an additional debt of $2.1 billion per day, far exceeding the economic growth capacity.

2. Expenditure crisis rather than interest rate issue: Analysts point to the loss of control in fiscal management.

Despite the Federal Reserve’s insistence on a “soft landing” narrative, actual data reveals a more severe reality: government spending as a percentage of GDP has soared to 44%, just below the levels seen during World War II and the 2008 crisis. The annual growth rate of income is only 2.5%, while the monthly increase in spending is nearly 10%. Analysts at The Kobeissi Letter emphasize: “Even if the Federal Reserve cuts interest rates, the trillion-dollar deficit will persist - this is a spending crisis, not an interest rate problem.”

3. Bond Market Warning: Yield Breaking 5% Reflects Erosion of Confidence

The yield on government bond auctions continues to exceed 5%, reaching a rare level in modern financial history. As the cost of debt refinancing skyrockets in a high-interest-rate environment, fiscal gaps are widening rapidly. This trend temporarily withdraws liquidity from risk assets in the short term, while in the long term, it undermines the credit foundation of fiat, creating strategic opportunities for crypto assets.

4. The Structural Hedging Value of Crypto Assets: From Digital Gold to System-Level Protection

When the sustainability of sovereign finance is questioned, the narrative of Bitcoin’s scarcity gains strong support. Against the backdrop of $38 trillion in debt and a continuous $1 trillion deficit, policymakers may tend to inflate the debt, further strengthening Bitcoin’s position as a store of value. Altcoins benefit indirectly as funds seek alternatives to government bonds, with stablecoins and tokenized government bonds becoming capital entry points, and future liquidity may spread to a broader crypto market.

V. Policy Crossroads: Election Year Stalemate and the Fed’s Dilemma

The next step in development depends on whether Congress can control spending (the likelihood is extremely low in an election year) and how the Federal Reserve balances interest rate policy with debt sustainability. Regardless of which path is chosen, there are significant risks, but they all point in the same direction: increasing vulnerability of the fiat system and normalization of hedging demand for crypto assets.

[Conclusion]

The US debt spiral is not only a macroeconomic issue but also a certain opportunity in the crypto world. When sovereign credit is eroded by fiscal deficits, decentralized assets become the inevitable choice for rational investors. Bitcoin is no longer just digital gold; it is also a technical hedge against systemic collapse—this is a core proposition of asset allocation in the new era.