U.S. Treasury yields hit new highs, triggering a policy shift; Bitcoin's medium-term narrative emerges

The US national debt has surpassed $38.5 trillion, reaching a historic high. This is not just a numerical record but also a macroeconomic signal. Against the backdrop of high debt, potential policy shifts, and long-term inflation expectations, inflation-hedging assets like Bitcoin are entering a new opportunity window. Currently, BTC price hovers around $93,000, with a 6.10% increase over the past 7 days. Market expectations for $90,000–$100,000 are also heating up, and the underlying logic warrants in-depth understanding.

The Real Dilemma of the US High Debt Environment

According to the latest data, the US national debt has reached $38.5 trillion, while US GDP is about $30 trillion, meaning the debt-to-GDP ratio exceeds 120%. An intuitive analogy is: for every $100 of economic value created, the US bears $120 in debt.

This number may seem abstract, but there are more tangible pressures behind it:

• Interest Expenses Skyrocket: The US government’s annual interest payments have exceeded $1 trillion, even surpassing the defense budget. This means an increasing proportion of fiscal revenue is used to “pay interest” rather than invest in economic growth.
• Debt Structure: About 70% of the debt is held by domestic investors, with the rest owned by foreign creditors such as Japan, China, and the UK. This adds complexity to policy-making.
• Historical Roots: The recent surge in debt mainly stems from extraordinary fiscal stimulus during the COVID-19 pandemic and sustained high spending over decades on infrastructure, military, and social welfare.

Policy Shift Is Inevitable

Under such high debt pressure, markets generally expect a shift from “anti-inflation” to “fiscal stability” policies. This is not speculation but based on economic principles: as debt pressure continues to rise, governments tend to lower interest rates to reduce financing costs.

More critically, several officials, including former Federal Reserve Chair Janet Yellen, have mentioned that the “fiscal dominance” risk is increasing, meaning monetary policy may be forced to serve fiscal needs. In other words, the Fed might no longer act entirely independently but consider the government’s debt situation.

Historically, similar policy shifts are often accompanied by:

• Lower or maintained low interest rates
• Potential asset purchases (quantitative easing)
• A weakening US dollar

The Beneficial Mechanism for Crypto Assets in a Low-Interest Environment

This is why high US debt could be a long-term positive for Bitcoin. The logic is straightforward:

Low interest rates and accommodative policies weaken the long-term purchasing power of fiat currencies. When the government needs to print money to ease debt pressures, the dollar faces devaluation risks. In this context, hard assets like Bitcoin and gold become more attractive—they have relatively fixed supplies and are less prone to devaluation due to policy easing.

Market performance already reflects this logic:

• Gold prices have surged significantly over the past year, indicating market concerns about currency devaluation.
• Bitcoin is following a similar path to gold, with analysts believing it could narrow the gap with gold in future cycles.
• The US yield curve has steepened noticeably (short-term rates controlled, long-term yields rising), and combined with a structurally weak dollar, this environment favors hard assets like Bitcoin.

The Market Is Already Pricing This Expectation

If the macro logic above holds, we should see market reactions already underway. In fact, that is the case:

Price Performance: BTC recently surpassed $90,000, with a 6.10% increase over 7 days. Expectations for further gains are rising. According to data from prediction market Polymarket, traders are betting a 70% chance that Bitcoin will reach $95,000 in January, and a 36% chance it will hit $100,000.

Institutional Sentiment: Recent news shows US institutions are regaining optimism:

• Coinbase’s premium gap has returned to zero, indicating US institutions are buying again.
• The Crypto Fear & Greed Index has risen from 29 to 40, moving out of “extreme fear.”
• The BTC long-short ratio remains above 1.0, with traders maintaining a net bullish bias.

These signals suggest the market is digesting the macro chain of high US debt → policy shift → bullish outlook for Bitcoin.

Summary

The US national debt surpassing $38.5 trillion is not an isolated event but a systemic macroeconomic signal. Under high debt pressures, the shift from “anti-inflation” to “fiscal stability” policies is inevitable, which will drive interest rates downward and potentially lead to accommodative policies. In such an environment, long-term value of inflation-hedging assets like Bitcoin is reinforced.

Current market performance—rising prices, institutional buying, improved sentiment—all confirm that this macro logic is being absorbed by the market. However, analysts also caution that short-term macroeconomic uncertainties remain, but in the medium term, the US debt dilemma is paving the way for Bitcoin.