NDV: Bitcoin, the Core Asset in an Era of Dollar Debasement

On Aug. 18, U.S. national debt surpassed $40 trillion, months ahead of schedule. The news stayed on the financial pages for just one day.

We believe it deserves to be read as a once-in-a-decade signal. The thesis of this article, in one paragraph: America's debt math has reached a point where it can only be solved through "dollar debasement" (as calculated by official institutions themselves); historically, the winners on this path are always scarce assets; gold has already completed its repricing and taken the top spot among global central bank reserve assets, while Bitcoin—the younger, scarcer asset under the same logic—has a market cap of only 5% of gold's. The previous generation's core anti-debasement asset was gold; this generation's menu has one more item: Bitcoin.

This story will unfold over many years, and we will track every milestone here.

I. First, Clarify the Word "Insurance"

When you buy fire insurance, you don't need to predict which day the fire will break out. You only need to confirm three things: the house is important, the fire source is real, and the premium is cheap enough relative to the risk.

This article argues exactly these three points:

The house: the purchasing power of your assets. It is denominated in dollars, and the dollar's credit rests on U.S. fiscal foundations;

The fire source: America's debt math has entered a stage where it can only be solved through "dollar debasement." This is not an opinion; it is what official institutions have calculated themselves;

The premium: among assets that hedge against this, gold has already repriced, while Bitcoin is still lying on the floor—the premium is unusually cheap.

There is one more thing insurance history has repeatedly proven: when enough people buy an insurance policy, it ceases to be insurance and becomes a core asset. Gold has just completed this status shift, and Bitcoin is walking the same path. Below, we proceed in order. Every number in this article has a source and a date; you are welcome to verify each one.

II. The Fire Source: An Arithmetic Problem Without Dispute

On Aug. 28, 2026, the number on the U.S. Treasury's books was $40,104,097,482,666—$40.1 trillion, roughly 123% of U.S. GDP. Over the past year, publicly held U.S. debt increased by a net $2.5 trillion.

More important than the total is the interest. In the just-ended fiscal year 2025, the U.S. government paid $970 billion in net interest, consuming 18.5% of all fiscal revenue—the highest level since records began in 1940. In plain terms: for every $5 the U.S. collects in taxes, nearly $1 goes to servicing interest on past borrowing.

And this equation only moves in one direction: the average interest rate on outstanding debt is only 3.45%, while the 10-year yield is around 4.75%—about $10 trillion of old debt will roll over in the next 12 months, and each rollover raises the interest cost by one notch. According to the Congressional Budget Office's (CBO) own projections, net interest will exceed $1 trillion for the first full year in fiscal 2026, reaching $2.1 trillion by 2036.

Here is a comparison worth viewing side by side: the supply of U.S. Treasuries grows by a net $2.5 trillion a year, with no ceiling; Bitcoin's supply is hard-coded at 21 million coins, halving every four years. On one side, politically determined infinite supply; on the other, code-enforced absolute scarcity—the widening gap between these two supply curves is the foundation of the entire argument.

III. Why the Fire Cannot Be Put Out: Budget Cuts Do Not Work Mathematically

Many people's instinct is: just spend less.

The math does not allow it. According to the Bipartisan Policy Center (BPC), based on CBO data, starting in 2025, U.S. mandatory spending (Social Security, Medicare, etc.) plus interest already roughly equals all fiscal revenue—every dollar Congress can actually vote on each year, including all defense spending, is borrowed.

The political reality is that both parties are adding, not subtracting: the large fiscal legislation of July 2025 (OBBBA) adds another $3.4 trillion in deficits over ten years, per CBO scoring; in February 2026, the Supreme Court ruled that large-scale tariffs exceeded executive authority, cutting off the government's only significant new revenue source and requiring refunds of about $166 billion. This year's deficit is estimated at $2.1 trillion—in peacetime, with full employment, a deficit of 6% of GDP.

Over the next decade, this fire has an official schedule, with authoritative sources at every stop:

2027: debt ceiling of $41.1 trillion hit again (BPC/CRFB)

2028–2030: debt-to-GDP surpasses the 1946 World War II record of 106% (CBO)

2029: global public debt exceeds 100% of global GDP, one year earlier than previously estimated (IMF)

2032: U.S. Social Security trust fund exhausted under current law, benefits automatically cut by 22% (2026 official Trustees report)

2033: Medicare hospital insurance fund exhausted, hospital payments automatically cut by 11% (same source)

2036: debt-to-GDP reaches 120%, net interest $2.1 trillion (CBO)

This is why it is "worth a ten-year bet": you don't need to gamble on which year something breaks. The government's own timetable shows that every year of the next decade moves in one direction. The roadmap of rising premiums is printed by the government itself.

IV. The Only Way to Put Out the Fire Has Played Out Once in History

When debt becomes too high to repay, there are theoretically three doors: default, genuine austerity, or dilution through inflation. A reserve-currency country will not choose the first door, and the second has just been shown not to exist. Only the third remains, known academically as financial repression: keeping interest rates below inflation so that bondholders and depositors, under the illusion of "not losing money in nominal terms," quietly lose a little purchasing power every year.

The last time the U.S. reached this position was 1946, with debt at 106% of GDP—almost exactly the same as today. The solution then: the Federal Reserve pegged short-term Treasury rates at 0.375% and capped long-term rates at 2.5%, holding for nine years; inflation averaged about 6.5% annually over the same period. By 1974, debt-to-GDP fell from 106% to 23%. Academic estimates (Reinhart & Sbrancia) show that the U.S. and U.K. "liquidated" debt equivalent to 3-4% of GDP per year through negative real interest rates—that money did not disappear; it was transferred out of savers' pockets. The U.K. was even more aggressive: from 270% down to 50%.

Economic historian Russell Napier put it bluntly: "Financial repression is slowly taking money from savers and the elderly. The 'slowly' matters—slow enough that the pain is not too obvious."

Look also at the 1971 precedent: in the decade after Nixon closed the gold window, gold rose from $35 per ounce to $850 in 1980. Every time a monetary system is forced to "reset," scarce assets complete a repricing. This is not the first time; it is simply this generation's turn.

Look at the news from August 2026: the U.S. Treasury doubled the size of a single long-term Treasury buyback to $4 billion, attempting to cap long-end yields; legendary trader Stanley Druckenmiller immediately published a signed article in The Wall Street Journal—"This is not liquidity management. This is price management." The Treasury Secretary publicly pushed back three days later at the G20. Both sides have entered the arena. Financial repression is not a prediction; it is breaking news.

V. Gold: The Entire Process of an Insurance Becoming a Core Asset, Played Out Before Our Eyes

Before fire insurance premiums rise, who moves first? The world's best-informed, most conservative investors—central banks.

Since 2022, global central banks have bought gold at a pace of 850-1,100 tonnes per year for four consecutive years, roughly double the average of the previous twelve years; in the second quarter of 2026, when gold prices corrected sharply, central banks bought 289 tonnes in a single quarter—a record for a second quarter—buying more as prices fell.

The result is a historic changing of seats: according to the European Central Bank's June 2026 report, gold now accounts for 27% of global central bank reserve assets, surpassing U.S. Treasuries (22%) for the first time in history to become the largest single reserve asset.

Please note the narrative weight of this event: in less than five years, gold went from a "marginal hedge" in portfolios to the top seat in the official reserve system—this is the complete process of an insurance becoming a core asset, performed by global central banks in front of everyone. The gold price is a footnote: +27% in 2024, +65% in 2025 (best since 1979), and a record high of about $5,590 in January 2026. The mechanism has also changed—the nearly two-decade negative correlation between gold and U.S. real interest rates broke down after 2022, because the marginal buyer shifted from rate-sensitive Western funds to sovereign nations that do not look at rates.

Gold tells this debt story, and its status shift is already more than half complete.

VI. Bitcoin: The Asset Halfway Down the Same Road

From early 2025 to today: gold roughly +80%, Bitcoin roughly -20%. The same currency-debasement story, two different pricings, a gap of about 100 percentage points. The amount of gold one Bitcoin can buy has compressed from over 30 ounces to about 16 ounces—the "cheapest" level of Bitcoin relative to gold on record.

Some say the market has chosen gold and eliminated Bitcoin. History offers another version: in 2019-2020, gold also made new highs first (August 2020), and Bitcoin lagged by four to seven months before launching, then caught up with even larger gains. The reason is not complicated—central banks have ready-made channels to buy gold, while compliant channels for large capital to buy Bitcoin were only recently completed.

Three latest signals:

Attributes are switching tracks: Bitcoin's 90-day correlation with gold has risen above 0.5 (near a historical high), while its correlation with the Nasdaq has dropped from over 60% to 33%—it is shifting from a "high-volatility tech stock" to a "hedge against sovereign debt fears" (Grayscale, 2026-08);

Capital is beginning to rotate: Bitcoin rose about 25% in August, the first positive August since 2021; in one week in late August, gold and Bitcoin funds saw combined inflows of $7 billion, a single-week record;

The catalyst comes directly from the debt story: the trigger for the August rally was precisely the Treasury's move to cap yields and the White House's statements on strategic reserves—the transmission mechanism is now connected.

VII. Why This Drawdown Is Not 2018 or 2022

After peaking in October 2025, Bitcoin fell as much as about 54%, and many treated it as just another "crypto crash." The data does not support that:

The maximum drawdowns of the previous three bear markets were -86%, -84%, and -78%; this cycle's -54%—each cycle shallower. Long-term holders have locked up 83% of circulating supply (a record high), and one-year realized volatility has fallen to multi-year lows, approaching levels of large-cap tech stocks. The holder structure has changed; the asset is maturing.

More importantly, the year and a half of price decline was precisely the fastest year and a half of institutional pipeline construction: stablecoin federal legislation (GENIUS Act) has taken effect; the market structure bill (CLARITY Act) faces a Senate vote in mid-September; bank custody has received regulatory clearance; an executive order to include alternative assets in 401(k) plans has been signed; and a strategic reserve framework has been established. U.S. spot ETFs have seen cumulative net inflows of about $55 billion, with BlackRock's IBIT alone holding about 777,000 coins.

Prices are falling while the pipeline is being built—the most worthwhile phase of a cycle for doing homework usually looks like this.

VIII. How Cheap Is the Premium: An Arithmetic Problem, Plus a Group of Heavyweight Endorsements

Bitcoin's total market cap is about $1.58 trillion, only 5% of gold's.

It does not need to "replace" gold—just capturing a fraction of gold's market cap means multiples of upside (scenario analysis, not a prediction). And the demand-side gap is glaringly obvious:

BlackRock's official white paper: a 1-2% Bitcoin allocation in a multi-asset portfolio is a "reasonable range," calling it a unique diversifier;

Bridgewater founder Ray Dalio (July 2025): "If you were constructing a portfolio for optimal risk-return, about 15% should be in gold or Bitcoin." He publicly said he holds about 1%, and reiterated in August 2026: sell bonds, buy gold and Bitcoin; the debt crisis window is "three years, give or take two years";

Paul Tudor Jones (April 2026): "Bitcoin is unquestionably the best inflation hedge—better than gold."

BlackRock CEO Larry Fink warned in his annual letter to investors: if the U.S. cannot control its debt, the dollar's reserve-currency status could lose out to digital assets like Bitcoin.

In reality, actual allocations by global institutions are not even a fraction of 1%—sovereign funds hold a few hundred million dollars, elite university endowments a hundred million, and most institutions close to zero. The gap between the "reasonable range" and "actual holdings" is the structural buying of the coming years: the global institutional capital pool is about $200 trillion; moving 1% is $2 trillion, more than Bitcoin's entire market cap today.

There is also a precedent: the gold ETF (GLD) listed in 2004, opening a compliant channel, and gold rose about 330% over the next seven years. Bitcoin's ETF listed in January 2024. Same movie, now roughly at minute 30.

For the past two years, everyone has been talking about AI—we also agree it is a once-in-a-decade productivity revolution. But look at the capitalization: the market cap of the U.S. mega-cap seven rose by about $6 trillion in two years, and in 2026 alone, AI capital spending by the five major cloud providers exceeded $800 billion; meanwhile, the equally important story of currency debasement—with theory (an 80-year debt cycle), official data (CBO interest path), and real money (central bank gold buying) all corroborating each other—has a flagship asset with a total market cap of only $1.58 trillion. The two truly big trades of this decade: one bets on productivity, the other on the monetary system—most portfolios hold only the first. The asymmetry is not in the thesis; it is in the positioning.

IX. Put the Opposing Side on the Table

Any bet worth making must first pass the opposing side:

"The debt story is already fully priced into gold." Possible. That is why we write down the falsification line: if gold continues to make new highs while Bitcoin's ratio to gold breaks down again, it means the catch-up logic is wrong, and we retreat with discipline.

"Bitcoin may continue to fall in the short term." Entirely possible. Most sell-side analysts believe the bottom is between September and December 2026, with bearish scenarios as low as $40,000-50,000. No one can time the exact bottom—what you can do is confirm the cycle position, control downside, and hold exposure within the window.

"When a real crisis hits, Bitcoin will fall first with risk assets." That is what happened in 2022. In the first phase of a liquidity shock, it falls as a risk asset; only in the second phase does it reprice as a scarce asset—which is exactly why insurance also requires risk control and structure, not just a slogan of "just hold."

One more blunt word upfront: this kind of asset routinely moves 20% in a month. The value of insurance is judged ten years from now; the cost is the bumps along the way. What we manage is never volatility; it is path and survival.