Grayscale Says $40T Debt Could Boost Bitcoin and Crypto

• Grayscale says $40 trillion in U.S. public debt could strengthen demand for Bitcoin, Ethereum, and Zcash as alternative assets.
• Treasury buybacks may ease rising borrowing costs, but Grayscale says they do not address the underlying structural budget deficits.
• Grayscale links heavier private borrowing for AI infrastructure to higher interest rates and growing pressure on Treasury financing.

U.S. public debt has topped $40 trillion as Treasury buybacks address rising borrowing costs, according to Grayscale Research. The Treasury announced larger purchases of long-maturity bonds last week, while Zach Pandl said structural deficits remain unresolved. Grayscale expects the debt burden to push investors toward Bitcoin, Ethereum and Zcash.

https://twitter.com/Grayscale/status/2093358354169299379?s=20

Treasury Buybacks Target Rising Bond Costs

The Treasury plans to bid for long-maturity Treasury notes and bonds in the open market. It will then retire the securities after purchasing them, reducing the risk-adjusted supply of Treasury bonds.

According to Pandl, the move can act as a mild form of economic stimulus, all else being equal. However, he said the need for buybacks reflects the pressure created by growing government debt.

The Treasury announced the buybacks on the same day it reported that U.S. public debt had crossed $40 trillion. The debt stock has risen almost continuously since the global financial crisis.

Private Borrowing Adds Pressure

Pandl linked the changing debt picture to borrowing conditions across the U.S. economy. After the housing bust, the private sector reduced borrowing, limiting the effect of rising government debt on interest rates.

That environment has since changed, according to Grayscale Research. The private sector now borrows heavily to fund the AI buildout, adding demand for financing.

Consequently, increased borrowing has pushed interest rates higher, consistent with textbook economic principles. The Treasury buybacks therefore address rising bond yields rather than the underlying budget deficits.

Grayscale Names Three Digital Assets

Grayscale Research said unchecked government debt growth could weaken confidence in fiat currencies. It also identified physical gold and certain cryptocurrencies as alternative stores of value.

Within digital assets, Grayscale said Bitcoin, Ethereum and Zcash could benefit from what it calls the “debasement trade.” Pandl described the buybacks as a response to borrowing costs, while structural deficits remain in place.

Grayscale’s key takeaway focuses on the difference between managing bond-market pressure and addressing the budget deficit itself. The research identifies Bitcoin, Ethereum and Zcash among the digital assets tied to that view.