U.S. federal debt has topped $40 trillion for the first time, reviving claims that bitcoin should be seen as a scarce, non-sovereign asset.

On Aug. 20, local time, Cointelegraph reported that the market is split between a view that the expanding debt could support long-term demand for bitcoin and a view that short-term prices are still more heavily driven by interest rates and the dollar.

The debt milestone coincided with U.S. Treasury moves aimed at calming selling pressure in long-term government bonds. Long-term Treasury yields had climbed to their highest level since 2007. U.S. Treasury Secretary Scott Bessent said the Treasury would double the size of buybacks for 10-year to 30-year Treasuries to at least $4 billion per operation. Long-term yields and the dollar fell after the announcement, while bitcoin and gold rose.

Bitcoin has broken out of its recent range and moved above $73,000. It has risen about 5.5 percent over the past 24 hours and about 15 percent over the past week.

The market has offered differing interpretations of what drove the rise. Bloomberg viewed it as reflecting expectations that U.S. cryptocurrency policy could turn favorable after U.S. President Donald Trump met industry executives at the White House on Aug. 19. Some investors, however, see Treasury measures and shifts in U.S. fiscal conditions as also playing a role.

JC Parets, founder of TrendLabs and a cryptocurrency analyst, focused on the Treasury's expanded purchases of long-term Treasuries. He said bond market participants viewed it as an attempt to counter rising long-term yields. He sees efforts to stabilize long-term yields as potentially boosting risk appetite and drawing buying into bitcoin.

Some also cautioned that the $40 trillion debt threshold does not automatically signal bitcoin strength. Dean Chen, an analyst at Bitunix, said Treasury buybacks could temporarily lower long-term yields and weaken the dollar, but persistent fiscal deficits and rising funding needs could ultimately push borrowing costs higher again. He said short-term direction for bitcoin depends more on U.S. dollar strength, long-term Treasury yields and inflation expectations.

Over the longer term, some said growing U.S. debt could strengthen the investment case for bitcoin. Analysts at the DeFi protocol Yield Basis said that if U.S. debt keeps rising, demand could grow for hedges against currency debasement. They pointed to bitcoin's fixed supply and the absence of a sovereign issuer.

U.S. interest costs are also rising rapidly. Reuters reported that in the first 10 months of fiscal 2026, interest costs became the second-largest item in the federal budget after Social Security, surpassing healthcare. That is why the market views expanding U.S. fiscal conditions not as a simple numbers issue but as a structural variable affecting interest rates, liquidity and the dollar's value.

Ultimately, the market's focus is split in two. In the short term, Treasury bond operations, long-term yields and the dollar's direction can shake bitcoin prices. Over the longer term, the key point to watch is whether mounting U.S. debt increases concerns about the dilution of fiat currency value and could spur demand for bitcoin's scarcity and non-sovereign nature.