Bitcoin Surges 33% Against Gold Amid U.S. Fiscal Woes

Bitcoin has recently surged to a new all-time high of $111.8k, even as traditional markets, including U.S. stock and bond sectors, faced significant challenges due to fiscal issues. On May 21, investors shunned the U.S. 20-year Treasury bond, leading to a decline in bond prices and a spike in yields to 5.1%. This bond market rout extended to the stock market, causing the Nasdaq to drop by 1.4% and the S&P 500 Index to slip by 1.6%. The U.S. dollar Index (DXY) also fell to a two-week low of 99.5.

In contrast, Bitcoin's price soared to a new high, a move that Tushar Jain of crypto VC MultiCoin Capital interpreted as a shift from a "risk-on" to a "risk-off" asset. Jain noted, "We are watching BTC transform from a risk-on asset to a risk-off asset. Today, we saw further proof that the government cannot cut the budget deficit. The market reacted by selling US treasuries, selling USD, selling equities, and buying BTC."

The rising yield on U.S. Treasury bonds indicates that the government will have to pay higher interest rates to borrow money for two decades, a situation analysts link to concerns about fiscal spending and debt. At the time of writing, the U.S. debt stood at $36.22 trillion. However, President Donald Trump’s tax bill is expected to lead to an additional $3 trillion to $5 trillion in spending, raising concerns about inflation and debt sustainability, as evidenced by the weak demand for 20-year Treasury bonds.

Moody’s recent downgrade of the country’s credit rating has further reinforced Bitcoin’s position as an alternative safe-haven asset alongside gold. Bitcoin has historically decoupled from gold in the first quarter of 2025, following U.S. stocks, which indicated it was a "risk-on" asset. However, in the second quarter, it became correlated with gold again, and both rallied higher despite Trump’s tariff wars.

With the worsening U.S. fiscal woes, Peter Schiff has urged his audience to invest more in gold. The question remains: which safe haven has better chances of outperformance in the short to mid-term? According to the BTC/gold ratio, an indicator that tracks Bitcoin’s price relative to gold, the crypto asset has higher odds of outpacing gold. Since April, BTC has eclipsed gold by 33% after the indicator bounced from the channel’s range-low. If it extends to the range-high at 43, then BTC would record extra 26% gains against gold.

As the global debt surges to an unprecedented $324 trillion in early 2025, concerns about the 'Everything Bubble' and its potential impact on the global economy have intensified. This massive debt figure highlights the vulnerabilities and imbalances that have accumulated over the years due to easy money and relentless borrowing. The debt is spread across governments, corporations, and households, with sovereign debt being the largest component. Governments have borrowed heavily to cushion the blow of the pandemic and fund various programs, while corporations have taken advantage of ultra-low rates to finance expansion and innovation. Household debt, particularly in advanced economies with hot housing markets, has also surged, testing the limits of household balance sheets.

The distribution of debt is not even, with the United States, Japan, and major Eurozone economies holding the lion’s share in absolute terms. However, the most dramatic increases are happening in emerging markets, particularly China, which has added trillions across government, corporate, and household sectors. This uneven distribution is a central concern for global financial stability, as emerging markets are now in the spotlight for their soaring debt-to-GDP ratios. Many developing countries have seen this ratio spike to alarming levels, raising fears of distress and default, especially as global growth slows and the U.S. dollar strengthens.

The $7.5 trillion jump in global debt in just one quarter signals that the appetite—or need—for borrowing remains strong, despite higher rates. Governments are still rolling out fiscal support or facing steeper interest bills, while corporations may be rushing to lock in funding before rates rise further. The relentless pace of accumulation adds urgency to debates over debt sustainability and financial stability.

The looming challenge for many emerging markets is the wave of local currency bond redemptions coming due between 2025 and 2027. Refinancing at higher rates could strain budgets and trigger liquidity crunches, risking defaults and contagion across borders. The interconnectedness of today’s markets means that stress in one corner can quickly spill over into others, raising the risk of a cascading selloff.

As uncertainty mounts, volatility is likely to surge across markets. Investors are already reassessing risk and seeking out safe havens, but the definition of “safe” is evolving in real time. Cryptocurrencies, famous for their volatility, could see even sharper swings as global stress rises. Some view Bitcoin as a hedge against inflation and fiat debasement, while others see it as a risky asset likely to be dumped in a broad selloff. Its correlation with tech stocks and persistent regulatory uncertainty only add to the unpredictability.

Gold’s reputation as a store of value is centuries old, its appeal rooted in tangibility and scarcity. Bitcoin, the upstart “digital gold,” shares some of these traits but remains untested in a true systemic crisis. As investors weigh their options, the coming period may reveal whether digital assets can rival gold’s safe-haven status—or if they’ll falter when turbulence hits.