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Interest Rate Spike in October Marks a Turning Point: US Debt Wall and Slowing Credit Cycle Collide

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Image of a bitcoin (BTC) coin with a falling red price chart in the background

Foto: DUSAN ZIDAR / Shutterstock.com

A chart showing the U.S. government paid over $100 billion in interest in a single October—roughly four to five times the usual amount—according to analysts, perfectly encapsulates the current situation. This is significant not only because the amount is historically high, but because it shows that the era of nearly cost-free borrowing is definitively over. What are the implications for the bitcoin price?

Cheap Debt Rolls Over Into a More Expensive World
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For more than a decade, the U.S. financed itself with short-term debt at (almost) zero percent interest. As long as rates remained low, this had little impact on the budget. But since the Federal Reserve has brought the policy rate to between 3.75 and 4.00 percent, that old, cheap debt is maturing. The refinancing is now happening at much higher rates.

October is traditionally a month with many coupon payments, making the jump in interest costs immediately visible. And according to analysts, this is not a one-off outlier, but the beginning of a more expensive financing period.

The Worst Possible Timing: The Credit Cycle Is Turning Down
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This rising interest burden coincides with a broader weakening in the economy:

  • Subprime payment delinquencies are at stress levels.
  • Record problems are emerging in the commercial real estate sector.
  • Specialized lenders are collapsing.
  • Banks are tightening credit conditions.
  • Corporate bankruptcies are rising (the highest in 15 years).
  • Oil prices are below $60, indicating declining demand.
  • The bond market is full of warning signals.

These signals are not converging by chance. They are typical for a phase where a long period of monetary tightening spills over into real economic damage.

A Massive Debt Wall Comes Into View
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The total U.S. debt now stands at around $38 trillion. Of this:

  • $11 trillion must be rolled over within one year.
  • More than 20% of all Treasuries mature in 2025.
  • By 2028, a full 61% of the entire debt stock will need to be refinanced.
  • In four years, approximately $28 trillion must be refinanced—one of the largest repricing waves in modern history. And this wave is colliding with an economy that is weakening.

Why This Increases Pressure for Rate Cuts
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The consequence is clear: the current interest rate is too high for both the private sector and the government. Once unemployment moves towards 5 to 6 percent, the Fed will no longer have time for small, sterile adjustments. Then, a real rate-cutting cycle of possibly 200 to 300 basis points will follow.

That movement is already underway:

  • Two rate cuts in September and October.
  • The end of Quantitative Tightening (QT) as of December 1.
  • And a new purchase program starting December 11.
  • Analysts expect another cut, despite internal Fed disputes.

For bitcoin, this would be a good thing. The digital currency really needs the support of the American central bank, because right now there is clearly too little liquidity (capital) in the financial system to push prices further up. If things don’t change soon, this bull market will be over.