$40 Trillion U.S. Debt Alarm Sounds, BlackRock Unexpectedly Bullish on Bitcoin and Gold

A 6% yield on 30-year U.S. Treasuries signals the start of a death spiral: Silicon Valley moguls warn, benefiting Bitcoin and gold.

Written by: Billy Bambrough, Forbes Digital Assets

Compiled by: AididiaoJP, Foresight News

Earlier this month, Bitcoin surged due to market panic but has recently shown a significant loss of momentum. The price is still down about 40% from its peak in October 2025. Even as the world's largest asset manager, BlackRock, reveals an unexpected shift, Bitcoin is expected to remain weak overall in 2026.

Currently, traders are waiting for potential changes brought by a Bitcoin ETF while refocusing on broader issues: Is the U.S. sliding into a $40 trillion debt "death spiral"? According to several investors and institutions mentioned in the article, once this narrative heats up, the first beneficiaries may not be U.S. Treasuries themselves, but Bitcoin and gold.

The U.S. debt crisis, as described in Silicon Valley investment circles, is no longer just about "numbers being too large"; it has entered a self-reinforcing phase.

"6% is just the beginning": Definition of the death spiral from the All In podcast

Tech investor Chamath Palihapitiya provided a straightforward threshold in the All In podcast, which he co-hosts with Jason Calacanis, David Sacks, and David Friedberg:

"If you see the yield on 30-year Treasuries reach 6%, that is the beginning of the death spiral."

This quote is frequently cited because it grounds abstract fiscal risks in a price that the market sees every day. An increase in the yield on 30-year U.S. Treasuries means long-term funding becomes more expensive; for the U.S. federal government, which is already burdened with about $40 trillion in debt, even a few basis points increase in financing costs can amplify interest payments into the trillions.

Friedberg elaborated on the issue more specifically. He warned that higher interest rates are about to make this $40 trillion debt even harder to roll over:

"The federal government has a problem: it must refinance $10 trillion in debt over the next 12 months. These debts are maturing soon. When bonds mature, the principal must be returned to the holders, and then the government must return to the Treasury market to issue new bonds and borrow money to roll over... Right now, borrowing money for the U.S. federal government is very expensive, and the reason is persistent inflation."

This is the standard path of the "death spiral": deficits push up the scale of bond issuance, bond issuance pushes up yields, yields push up interest, and interest in turn expands the deficit. Once the market begins to doubt whether the U.S. can roll over maturing debt at acceptable costs, buyers will demand higher compensation, and the spiral will start turning on its own.

Becerra intervenes to suppress yields, Druckenmiller immediately counters

Earlier this month, U.S. Treasury Secretary Scott Becerra announced that he would intervene to try to lower bond yields and reduce government borrowing costs. The news shook international markets. The Treasury's direct intervention to improve long-term liquidity was intended to "cool down" the Treasury market but was immediately interpreted by some investors as a sign that the government is starting to care about high borrowing costs.

Billionaire investor Stanley Druckenmiller quickly countered. His core judgment is firm: only by reducing government borrowing can long-term bond yields be truly and sustainably lowered. In other words, relying on technical interventions, buybacks, or liquidity arrangements can only provide temporary relief and does not solve the underlying supply-demand imbalance.

Earlier this year, Druckenmiller also made a longer-term judgment: due to the U.S.'s ever-expanding $40 trillion debt, the dollar will no longer be the global reserve currency in 50 years, potentially being replaced by Bitcoin or cryptocurrencies. He emphasized that the approximately $1.8 trillion deficit must be addressed because "this is the only way to sustainably lower long-term bond yields."

On one side, the Treasury is trying to push down long-term rates, while on the other, seasoned macro investors insist that "less borrowing is the right path." The collision of these two positions will inherently strengthen the market's discussion about the credibility of the dollar and the supply-demand dynamics of U.S. Treasuries.

The numbers are hard to ignore: monthly deficit of $432 billion

Concerns are not just verbal. U.S. Treasury data shows that the federal budget deficit in July reached $432 billion. According to Reuters, this is the largest monthly deficit since March 2021, pushing the budget gap for the fiscal year 2026 to about $1.8 trillion so far.

For traders, the impact of such data lies not in "another month of losses" but in how it overlaps with the refinancing timetable: about $10 trillion in debt needs to be rolled over in the next 12 months, interest rates are unfavorable for borrowers, and the deficit continues to hit new highs monthly. The market will naturally ask the next question—who will buy so much new debt, and how high will buyers demand the price to be?

Bitcoin rebounded significantly in August, with part of this attributed to rising concerns over the U.S.'s $40 trillion debt. This means that in this round of increases, aside from ETF funds and trading sentiment, there is an older macro narrative at play: when fiat currency credibility is damaged, funds will seek assets with a hard supply cap.

BlackRock's unexpected stance: Debt concerns rise, benefiting Bitcoin and gold

The most attention-grabbing statement came from BlackRock's head of crypto assets, Robert Michnik, on CNBC:

"Debt and deficit levels are the main concerns for the market." He added that when these concerns resurface in the headlines, they often benefit "assets like Bitcoin and gold."

This is not a slogan from the retail sector but rather a statement from the head of crypto operations at the world's largest asset management firm, placing Bitcoin and gold in the same basket of "hedging fiscal pressures." Earlier this month, Michnik also stated that Bitcoin's recent decoupling from the stock market is "healthy" because it can serve as a diversification tool, hedging some "left-tail risks" in investment portfolios.

Institutional holdings also lend weight to this statement. Since launching its leading Bitcoin ETF in early 2024, BlackRock has held nearly 750,000 Bitcoins, valued at nearly $50 billion. For many traditional funds, buying Bitcoin no longer requires self-custody of private keys; an ETF channel has turned "macro hedging" into a configurable product.

Simon Peter Masabni, head of business development at XS.com, explained in an email why the market connects Treasury intervention with Bitcoin's rise: Becerra's measures aim to improve liquidity in the longer-term debt market, alleviating the pressure that has pushed U.S. Treasury yields to levels not seen in years.

"However, some market participants interpret these measures as efforts to curb borrowing costs, reigniting concerns about potential dollar devaluation. This environment is favorable for Bitcoin—its supply cap of 21 million continues to reinforce its narrative as a scarce asset compared to fiat currencies."

Thus, the logical chain is completed by the market: excessive deficit → maturing debt needs to be rolled over → high interest makes rolling over expensive → official intervention to suppress yields → concerns about whether this is overextending dollar credibility → funds shift towards gold and Bitcoin.

This time, Bitcoin is included in the "de-dollarization hedge" rather than merely as a risk asset

The article aims to emphasize that it is not just about "Bitcoin rising" but that the pricing framework may be shifting. In recent years, Bitcoin has often moved in tandem with U.S. stocks, especially high-risk tech stocks; once it decouples from the stock market, institutions view it as a hedging tool in their portfolios. Michnik's use of the term "healthy" refers to this role change.

Gold is not unfamiliar with this narrative. It has traditionally been an asset to hedge against currency devaluation and sovereign credit erosion. Bitcoin is mentioned alongside it, relying on two factors: its total supply capped at 21 million and the fact that Wall Street has already integrated it into mainstream accounts through ETFs. BlackRock manages nearly 750,000 Bitcoins in its products while publicly stating that when debt and deficits return to the headlines, both Bitcoin and gold may benefit—this psychological impact on the market often outweighs the target price set by a single analyst.

Of course, the original text does not provide a precise prediction that "Bitcoin will definitely rise to a certain price" nor does it state that the death spiral has already been completed. It records a set of warming judgments: if the yield on 30-year U.S. Treasuries approaches 6%, Silicon Valley investors believe the spiral has begun; the need to refinance about $10 trillion in the next year makes it easier for interest and deficits to bite each other; Treasury intervention raises the debate of "is this to protect financing costs"; and BlackRock directly connects this macro line to Bitcoin and gold.

For Chinese readers, the core of this news lies not in the alarming words in the title but in three sets of numbers that have already been laid out: approximately $40 trillion in debt, about $10 trillion in refinancing over the next 12 months, and a monthly deficit of $432 billion in July, totaling about $1.8 trillion for the fiscal year so far. As long as these three sets of numbers continue to worsen, the narrative of Bitcoin and gold as "scarce assets" will repeatedly be brought up by institutions.