tl;dr
Two months after Elon Musk criticized the Trump administration’s debt management, the US added $1 trillion in federal debt over 48 days, averaging $21 billion daily. The national debt nears $38 trillion, with July’s $291 billion deficit as the second largest on record. Fiscal year 2025 deficits are ...
Two months after Elon Musk criticized the Trump administration’s handling of the national debt, reports reveal that the US has added another $1 trillion in federal debt within just 48 days. Deficit spending, though a massive macroeconomic driver, receives surprisingly little mainstream attention. Bitcoin, Ethereum, and decentralized finance (DeFi) have evolved beyond mere speculative assets to become structural hedges against a deteriorating fiscal system.
The surge in debt equates to approximately $21 billion added daily, underscoring warnings from analysts and investors like Musk that the fiat monetary system is on an unsustainable trajectory. Musk notably highlighted the One Big Beautiful Bill Act as a significant amplifier of the already concerning deficit. Since August 11, the US debt has swelled by $200 billion, pushing the total near $38 trillion. In July alone, the government ran a $291 billion deficit—the second largest July deficit on record. For the fiscal year 2025, deficits are projected at $1.63 trillion, marking a 7.4% year-over-year increase and potentially exceeding $2 trillion. Government spending has surged to 44% of GDP, a peak only previously reached during World War II and the 2008 financial crisis.
Despite Federal Reserve assurances of a soft landing, revenues grow sluggishly at 2.5% annually while spending jumped nearly 10% last month. Analysts at the Kobeissi Letter clarified the core issue: “It’s a spending issue, NOT an interest rate issue… It’s a spending crisis.” This suggests that even slashing interest rates would not prevent annual deficits from remaining in the trillions.
Bond markets are already showing strain, with investors demanding yields above 5% for US Treasuries—a modern rarity. As refinancing costs rise, so does the fiscal gap, creating complex challenges for equities, commodities, and especially cryptocurrency markets. Short-term, higher yields reduce liquidity for riskier assets, but long-term persistent deficits erode confidence in fiat currency. Historically, such conditions have bolstered Bitcoin and other hard-cap digital assets.
Bitcoin’s reputation as “digital gold” strengthens when fiat governments exhibit fiscal weakness. Some experts warn of “100% certainty of US bankruptcy over the long run” without fiscal reform. This outlook fuels the belief in crypto assets as a safeguard against sovereign mismanagement. With the national debt climbing and deficits firmly above $1.5 trillion yearly, the risk of policymakers resorting to inflation to manage obligations grows, enhancing Bitcoin’s scarcity-based value proposition.
Altcoins may also gain indirectly, as institutional investors search for yield alternatives outside heavily pressured Treasury markets. Stablecoins and tokenized Treasuries have already begun absorbing capital, and liquidity spillovers may benefit the wider crypto ecosystem over time. The future decisively depends on whether Congress can curtail spending—a doubtful prospect during an election year—and how the Federal Reserve navigates the balancing act between interest rates and debt sustainability. Regardless of the direction, significant risks loom for financial and crypto markets alike.