According to an analysis published on August 26 by Grayscale's Head of Research, Zack Pandl, the rapid rise in U.S. national debt could boost demand for BTC, ETH, and ZEC.
"The unchecked growth of national debt undermines confidence in fiat currencies and prompts investors to seek alternative stores of value, such as physical gold and certain cryptocurrencies," he wrote, adding:
"We believe that in the digital asset space, the so-called 'debasement trade' will primarily benefit bitcoin, ethereum, and Zcash."
Among these three assets, bitcoin has the most compelling scarcity argument due to its programmed maximum supply of 21 million coins and the absence of a state issuer. However, bitcoin's role as a store of value remains debated due to its volatility, limited history compared to gold, custody risks, and sensitivity to overall financial conditions. Ethereum represents a decentralized settlement network, while Zcash combines an architecture similar to bitcoin's with additional privacy features.
Treasury Department Expands Long-Dated Bond Buyback Program
Pressure in the government bond market prompted the Treasury Department to announce on August 19 its intention to buy back more securities with longer maturities. According to the details of the expanded buyback program, the department will at least double the maximum buyback size per operation to support liquidity from $2 billion to $4 billion. The larger operations will cover maturity sectors from 10 to 20 years and from 20 to 30 years and will begin on September 9.
The Treasury's bond buybacks allow the government to purchase older securities on the open market and retire them while issuing new debt. These operations can improve market liquidity and reduce the duration-adjusted supply held by investors, but they do not necessarily reduce the nominal amount of debt held by the public.
The latest expansion of the buyback program coincided with the federal government surpassing a historic debt milestone. The Treasury's daily report for August 18 showed that total national debt exceeded $40 trillion, marking the first time the volume of outstanding federal obligations surpassed this level.
These purchases may alleviate pressure in certain segments of the bond market without altering the spending-revenue imbalance that necessitates continued borrowing. Therefore, Grayscale views these operations as a reaction to rising yields rather than a solution to structural deficits.
Structural Deficits Support the Debasement Theory
Sustained budget deficits indicate that federal debt is likely to continue growing beyond the recent milestone. In February, the Congressional Budget Office projected a federal deficit of $1.9 trillion in fiscal year 2026, growing to $3.1 trillion by 2036.
Rising interest rates could intensify budgetary pressure as the government refinances maturing securities and issues new debt to cover spending exceeding revenue. Approximately $32.266 trillion was held by the public, with $7.782 trillion in intragovernmental holdings, illustrating the scale of the government's debt burden.
According to Grayscale, active private sector borrowing to finance AI infrastructure also competes with government debt for available capital. This combination of factors could put upward pressure on interest rates, increase federal funding costs, and heighten investor concerns about long-term fiscal stability.
The Treasury Department plans to provide more details on future buyback volumes during the next quarterly refunding on November 4. Meanwhile, the Congressional Budget Office (CBO), in the same baseline scenario published in February, projected that debt held by the public would grow from 101% of gross domestic product in 2026 to 120% by 2036.
