American debt: Grayscale names 3 cryptos that could benefit from it

Grayscale believes that the evolution of US debt would favor bitcoin, Ether and Zcash. These three cryptos could benefit from significant demand for assets independent of fiat currencies. Indeed, this theory comes as the federal debt has just exceeded 40,000 billion dollars. However, it does not represent a current projection. An increase in rates triggered by US funding needs would also penalize the crypto ecosystem in the short term.

Grayscale selects BTC, ETH and ZEC

Grayscale’s head of research, Zach Pandl, presented this analysis on August 26. For him, an uncontrolled increase in public debt can weaken confidence in national currencies and encourage investors to seek other stores of value.

He exposed thus the selection of Grayscale:

In cryptos, we believe that hedging against currency dilution will mainly benefit bitcoin, Ether and zcash.

THE characteristics of the chosen assets are as follows:

• Bitcoin has a maximum supply set at 21 million BTC;
• Ether is used to pay for transactions and secure Ethereum;
• Zcash combines a limited supply of 21 million ZEC with optional confidential transactions.

This hedge against monetary dilution (debasing trade) constitutes a strategy which aims to acquire rare assets to protect against the loss of purchasing power of currencies. So, this theory historically relates to gold. Grayscale believes that some cryptos now serve a similar function.

However, the three cryptos do not have the same specificities. Indeed, bitcoin and Zcash apply a predetermined issuance limit, while Ether does not have an absolute ceiling. Its offer depends mainly on the new issues granted to validators and the destruction of part of the fees.

The predefined scarcity does not guarantee price stability either. Therefore, BTC, ETH and ZEC remain volatile. Their progress also depends on available liquidity, regulation, institutional flows and investors’ appetite for risk.

Treasury buybacks do not necessarily reduce this liability

The total public debt of the United States exceeded 40 trillion dollars on August 18. Of this amount, nearly $32,266 billion is held by the public while $7,782 billion corresponds to claims between various federal structures.

The US Treasury published, a few days later, an increase in its purchases of long-term bonds. From September 9, the ceiling will increase from at least $2 billion to $4 billion per transaction for securities with maturities between 10 and 30 years.

Through these acquisitions, the Treasury can retire older, less liquid bonds and continue to issue new securities. They facilitate secondary market operations and reduce certain pressures on yields.

This transaction does not, however, amount to repayment of the debt. THE Treasury press release expressly describes the measure as supporting the liquidity of the bond market. It does not correct either the budget deficit or the gap between federal expenditures and revenues. Grayscale then believes that these repurchases remedy the symptoms, but not the cause of the problem.

Debt supports Grayscale’s thesis without guaranteeing an increase

The Congressional Budget Office projects a federal deficit of $1.9 trillion for the current 2026 fiscal year. This sum would reach 3100 billion in 2036 if current legislative regulations generally remain unchanged.

Debt held by the public could rise at the same time from 101% of gross domestic product in 2026 to 120% in 2036, according to CBO projections. Thus, interest-related charges would justify a significant part of this development.

This progression can consolidate the search for rare assets. It can also create the opposite effect in the short term. If the profusion of bond issues keeps yields high, risk-free investments are more attractive and the cost of capital increases. Investors can then reduce their exposure to cryptos.

Scheduled for November 4, the next quarterly announcement from the US Treasury will clarify the progress of the buyback program. Bond yields, the dollar and flows into crypto products can help verify whether the scenario indicated by Grayscale is truly starting to materialize.