Grayscale says surging U.S. government debt could push investors toward bitcoin, ethereum, and zcash as alternative stores of value. The call comes days after Washington's public debt crossed $40 trillion and the Treasury expanded its bond buyback program.
Grayscale's Head of Research, Zach Pandl, said rising U.S. government debt could strengthen demand for bitcoin, ethereum, and zcash. In an Aug. 26 analysis, Pandl argued that unchecked debt growth undermines confidence in fiat currencies and pushes investors toward alternative stores of value such as gold and select cryptocurrencies.
Grayscale Names Three Cryptos in the Debasement Trade
Pandl wrote that "the so-called 'debasement trade' will primarily benefit bitcoin, ethereum, and zcash." Bitcoin carries the most established scarcity case among the three through its capped supply of 21 million coins and its lack of a government issuer, though its role as a store of value remains debated given its volatility and limited history compared with gold. Ethereum offers a decentralized settlement network, while zcash pairs a bitcoin-like design with optional privacy features.
Treasury Expands Buybacks as Debt Tops $40 Trillion
The Treasury announced on Aug. 19 that it would at least double its maximum liquidity-support buybacks, from $2 billion to $4 billion per operation, covering the 10- to 20-year and 20- to 30-year sectors starting Sept. 9. The expansion followed a Daily Treasury Statement showing total public debt above $40 trillion for Aug. 18, the first time federal obligations crossed that level.
Buybacks let the government retire older securities while issuing new debt, which can ease market liquidity but does not necessarily reduce the nominal amount owed. Grayscale therefore treats the program as a response to rising yields rather than a fix for the underlying deficit.
Structural Deficits Keep the Debt Rising
The Congressional Budget Office projected in February a $1.9 trillion federal deficit for fiscal 2026, growing to $3.1 trillion by 2036. Of the current total, $32.266 trillion is held by the public and $7.782 trillion sits in intragovernmental holdings. Grayscale also points to heavy private-sector borrowing for artificial intelligence infrastructure as a competing draw on capital that can push interest rates higher.
The Treasury is due to detail future buyback sizes at its next quarterly refunding on Nov. 4. The CBO's February baseline projected debt held by the public would rise from 101% of gross domestic product in 2026 to 120% by 2036.
Source: Bitcoin.com News
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