OMG! Bitcoin to Save US Economy? 🤑

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Right, so Matthew Sigel (Head of Digital Assets Research at VanEck, very important title, you know 😉) has had a bit of a brainwave. Apparently, the US government is facing a rather HUGE refinancing debt thingy – like, $14 trillion HUGE! So, naturally, Bitcoin is the answer. Obvs.

His cunning plan involves something called “BitBonds.” Sounds a bit James Bond-ish, doesn’t it? Basically, it’s a 10-year financial instrument that’s a bit like a US Treasury bond snuggling up with some Bitcoin (BTC). Stability meets potential riches, darling! 🥂

Can Bitcoin-Backed Bonds Actually Save Us From Ourselves? 🤷‍♀️

Apparently, Sigel’s idea is that 90% of the funds go into safe-as-houses US Treasury thingies, and the other 10% goes wild with Bitcoin. The government then buys Bitcoin with the money from selling these bonds. Genius! 💰

Investors get all the Bitcoin gains up to a 4.5% yield-to-maturity thingy. Anything more than that, they have to share with the government. How very socialist! 😜

“An aligned solution for mismatched incentives,” Sigel remarked. (Sounds like something out of a self-help book, doesn’t it?)

From the investor’s point of view, Sigel reckons the bond breaks even if Bitcoin grows by 8% to 17% per year. But if Bitcoin goes totally bonkers and grows by 30%–50%, well, hello riches! 🤩

“A convex bet—if you believe in Bitcoin,” he added. (Or if you’re feeling particularly reckless! 😈)

Of course, it’s not all sunshine and Bitcoin rainbows. Investors take the hit if Bitcoin crashes, but only get a bit of the upside. And if Bitcoin doesn’t perform, those low-coupon bonds might not be so appealing. 😟

The Treasury, however, is pretty safe. Even if Bitcoin goes belly up, they still save money compared to issuing regular bonds. As long as the coupon stays low. Fingers crossed! 🙏

“BTC upside just sweetens the deal. Worst case: cheap funding. Best case: long-vol exposure to the hardest asset on Earth,” Sigel stated. (Sounds a bit like a dating profile, doesn’t it? “Hardest asset on Earth” – ooh la la! 😉)

Sigel reckons this hybrid approach makes everyone happy. The government gets cheaper money, and investors get some inflation protection. Win-win! (Maybe… 🤔)

This whole thing comes as the US debt is spiralling out of control, reaching a frankly terrifying $36.2 trillion. The Bitcoin Policy Institute (BPI) is also on board with this idea. So, you know, it must be legit. 😇

“Building on President Donald J. Trump’s March 6, 2025, Executive Order establishing the Strategic Bitcoin Reserve, this white paper proposes that the United States adopt Bitcoin-Enhanced US Treasury Bonds (“₿ Bonds” or “BitBonds”) as an innovative fiscal tool to address multiple critical objectives,” the brief read. (Sounds like someone’s been watching too much “House of Cards”! 🙄)

Apparently, issuing $2 trillion in BitBonds at a 1% interest rate could cover 20% of the Treasury’s refinancing needs for 2025. Blimey! 😲

“Over a ten-year period, this represents nominal savings of $700 billion and a present value of $554.4 billion,” the authors wrote. (Numbers! My brain hurts! 😵‍💫)

The BPI reckons if Bitcoin grows by 36.6% per year, it could pay off $50.8 trillion of federal debt by 2045. Which sounds great, if you’re still alive then! 👵🏻

All this is part of a bigger conversation about Bitcoin and national finances. Senator Cynthia Lummis thinks a US Strategic Bitcoin Reserve could halve the national debt. VanEck’s analysis suggests it could reduce $21 trillion of debt by 2049. So, you know, maybe Bitcoin really is the answer. Or maybe we’re all doomed. 🤷‍♀️

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2025-04-16 10:54