The U.S. gross national debt has already exceeded $38 trillion, which is the fastest accumulation of $1 trillion in a non-pandemic period in recent history.
Analysts predict a sharp rise in interest payments over the next decade and indicate that the country’s fiscal path might destabilize the economy, even leading to the dollar losing its reserve currency status.
Simultaneously, Elon Musk sounded the alarm that the U.S. might become “bankrupt” without drastic reforms and swift economic growth. In this context, he and others mentioned Bitcoin as a possible value-preserving asset — a digital currency “lifeboat” if the U.S. dollar loses its credibility.
There are three main factors linking the debt crisis to Bitcoin’s attraction:
Firstly, if the U.S. dollar weakens due to high borrowing and inflation expectations, then limited-supply assets like Bitcoin will become more appealing as hedges. Hence, the fate of the economy — often reassessed after major economic calendar events such as CPI releases or Fed meetings — might be highly linked to the Bitcoin price.
Secondly, the institutional acceptance of Bitcoin is accelerating. Spot BTC ETFs continue to attract significant inflows, signaling growing legitimacy within the mainstream financial system. For example, global crypto ETFs saw $5.95 billion in inflows during the week ending Oct. 4, 2025, with $3.55 billion of that being allocated to Bitcoin.
Finally, the increasing uncertainty in traditional government-debt markets may push capital investors toward alternative asset classes, further strengthening Bitcoin’s position as “digital gold”. Yet the Bitcoin rescue narrative has some exceptions.
The digital currency remains unstable and lacks the deep liquidity and historical reliability of conventional safe-haven assets, such as gold or U.S. Treasuries.
The institutional interest, on the one hand, is growing, but on the other hand, it shows inconsistency. Although there have been large inflows at the beginning of the year, recent data shows a 90% decline in Bitcoin ETF interest, indicating that institutional investors have become less enthusiastic.
Regulatory uncertainty also poses a major risk. In the event of a major financial crisis, authorities could still restrict access to crypto or impose stricter capital controls, thereby undermining Bitcoin’s role as a safe asset.
Lastly, the dominance of the U.S. dollar in international commerce and finance remains a significant obstacle. The dollar may be under great pressure, but the global transition away from it would be slow and complicated, meaning Bitcoin is not yet ready to replace the world’s reserve currency system as a full or immediate substitute.
In the scenario of a further escalation of the U.S. debt crisis and a complete loss of market confidence in the dollar, Bitcoin may be considered as one of the alternative investments.
Nevertheless, this will only happen if there is the continuous presence of institutional investors, enough liquidity in the markets, and proper regulations. The following are the main indicators that need to be watched closely:
- New investments in Bitcoin spot ETFs;
- The value of the U.S. dollar (DXY) and its correlation with Bitcoin’s price;
- Increased interest payment costs on the U.S. government budget;
- Any government moves or changes in regulations that impact the crypto markets.
The U.S. debt reaching $38 trillion, along with warnings from analysts and Elon Musk, signals the weakness of the fiscal system. Bitcoin is increasingly seen as a speculative hedge or alternative reserve, and the inflows into spot ETFs are backing that trend.
However, the risks associated with the market structure and regulations remain significant. Bitcoin may serve as a small life raft, but it is still too early to say it would be a full replacement of the dollar-based monetary system.