SKN | U.S. National Debt Hits Record $38.5 Trillion, Reviving the Case for Bitcoin and Gold

Key Points:

 • U.S. national debt has reached a record $38.5 trillion, with interest costs now exceeding $1 trillion annually.

• Rising debt revives concerns over fiscal dominance, potentially pressuring central banks to keep rates low.

• A weaker dollar and steepening yield curve may favor assets like bitcoin and gold in 2026.

The U.S. national debt has surged to an all-time high of $38.5 trillion, underscoring mounting fiscal pressures that are reshaping expectations for interest rates, currency stability, and the outlook for alternative assets such as bitcoin and gold.

According to official debt dashboards, the latest increase pushes America’s debt-to-GDP ratio beyond 120%, a level historically associated with constrained policy choices and rising concerns over long-term monetary credibility. With U.S. gross domestic product hovering near $30 trillion, the federal government now owes roughly $120 for every $100 the economy produces annually.

A debt profile dominated by domestic lenders

More than 70% of U.S. government debt is held domestically, primarily by households, pension funds, banks, and the Federal Reserve system. The remaining share is owned by foreign creditors, led by Japan, China, and the United Kingdom. While heavy domestic ownership reduces immediate external vulnerability, it also tightens the feedback loop between fiscal policy, monetary decisions, and domestic financial conditions.

The cost of servicing that debt has become increasingly burdensome. Annual interest payments have now surpassed $1 trillion, exceeding U.S. defense spending and making interest one of the largest line items in the federal budget. This dynamic leaves policymakers with fewer palatable options as deficits persist.

Fiscal dominance back in focus

Rising debt levels have revived discussions around fiscal dominance — a scenario in which monetary policy becomes subordinated to the government’s financing needs rather than focused solely on controlling inflation. Several prominent U.S. officials have warned that excessive debt could pressure central banks to keep interest rates artificially low to manage borrowing costs.

Former Treasury Secretary and Federal Reserve Chair Janet Yellen has previously acknowledged that high debt burdens can constrain rate policy over time. Meanwhile, President Donald Trump has repeatedly argued for rapid rate cuts, calling for benchmark rates closer to 1% or below to ease fiscal strain.

Lower interest rates reduce the government’s debt-service burden, but they also tend to weaken the currency and inflate asset prices — a tradeoff that markets are increasingly pricing in.

Yield curve signals and currency concerns

Analysts point to a steepening U.S. yield curve as an early signal of this shift. Short-dated Treasury yields have remained relatively subdued, while longer-dated yields have risen as investors demand compensation for inflation risk and fiscal uncertainty. According to analysts at Bitfinex, this configuration often coincides with a structurally weaker dollar.

“This environment tends to reward assets with real or defensive characteristics,” Bitfinex analysts said, highlighting gold and bitcoin as natural beneficiaries when confidence in fiat currency erodes.

Those fears are already visible in traditional markets. Gold surged roughly 60% last year, reflecting heightened concern about currency debasement — a phenomenon with deep historical roots. Economists often cite the Roman Empire’s gradual dilution of coinage as an early example of how governments finance excessive spending at the expense of currency value.

Why bitcoin enters the conversation

For digital asset investors, the debt debate reinforces bitcoin’s long-standing narrative as a hedge against monetary debasement. Bitcoin, with its fixed supply of 21 million coins, is structurally insulated from policy-driven money creation — a feature that becomes more attractive as governments rely on low rates and liquidity injections to manage debt.

While bitcoin has lagged gold during parts of the recent metals rally, analysts argue that it tends to respond with a delay. As rate expectations shift and real yields compress, demand for scarce, non-sovereign assets often broadens beyond precious metals.

Looking ahead

The trajectory of U.S. debt suggests fiscal pressures are unlikely to ease soon. Whether through slower growth, higher inflation tolerance, or direct monetary accommodation, the path of least resistance for policymakers may involve keeping financial conditions looser than fundamentals alone would justify.

For markets, that backdrop supports continued interest in assets perceived as stores of value outside the traditional financial system. Bitcoin may not move in lockstep with gold, but as currency debasement risks re-enter the mainstream policy debate, its role in global portfolios is increasingly difficult to ignore.