The US national debt has surged to a fresh all‑time high of $39.68 trillion, re‑igniting the so‑called “debasement trade” that has long framed bitcoin as a hedge against rampant government borrowing. Yet, as the macro case for scarce assets grows louder, bitcoin’s recent price action is sending a starkly different message: a textbook bull trap that has left the market leaning heavily bearish.
Total public debt now climbs by roughly $7 billion to $10 billion every business day, with annualised interest costs hovering near $1 trillion—more than the Department of Defense’s entire budget. With roughly a third of Treasury debt maturing within twelve months and needing to be rolled over at today’s elevated rates, the fiscal arithmetic is forcing policymakers toward policies that suppress real yields. This environment, proponents argue, debases the dollar and fuels demand for assets that cannot be printed, chiefly gold and bitcoin. Ray Dalio, JPMorgan analysts, and Citadel’s Ken Griffin have all publicly endorsed elements of this thesis, grouping bitcoin with gold as the “debasement trade”.
However, the short‑term picture undercuts that logic. Bitcoin briefly pushed to $66,921 before being rejected at key resistance levels, falling back to around $63,400. Every major daily‑chart indicator—the exponential moving averages, Relative Strength Index, and Squeeze Momentum Indicator—is painting an unequivocally bearish picture. A death cross has been active for months, the RSI sits at a tepid 46.5, and the squeeze momentum shows barely any bullish lift. On prediction market Myriad, traders are giving a 65.7% probability that bitcoin touches $55,000 before $84,000.
Global risk‑off sentiment is compounding the technical weakness. South Korea’s KOSPI index triggered a circuit breaker after an 8% plunge, US equity futures are mixed, and crypto liquidations topped $670 million in 24 hours, with $533 million coming from crushed longs. The Federal Open Market Committee begins its two‑day meeting today, with Chair Kevin Warsh widely expected to hold rates at 3.50–3.75%, but the memory of his hawkish June presser is driving pre‑emptive deleveraging.
The debasement trade remains a coherent, long‑horizon thesis backed by serious money, but it is not yet priced in. Bitcoin sits roughly 48% below its 2025 peak, gold is 27% off its record, and both have drifted lower even as the debt has repeatedly set records. The missing catalyst is a sustained decline in real 10‑year yields while the debt keeps climbing—a condition that has not materialised in 2026. Until it does, the charts suggest the immediate path of least resistance is lower.
