- 4/17/2025
"The U.S. Is About to BUY BILLIONS in Bitcoin?! (Here’s the Crazy Plan)", discusses a speculative scenario where the U.S. government considers investing billions in Bitcoin. It delves into the potential implications of such a move on the cryptocurrency market and the broader financial system.
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00:00Fixing the US government's debt problem with Bitcoin is an idea that's been around for years,
00:06but it's one that was never really taken seriously and that's mostly because it wasn't clear how
00:11exactly this could be done. How to do this? That's until earlier this month when a Bitcoin-focused
00:18think tank proposed a solution that would not only increase the demand for bonds,
00:23but could also cause Bitcoin's price to explode higher.
00:26Today, we're going to summarize this solution, see whether it could work, and explain what it
00:32could mean for Bitcoin and other cryptos. My name is Nick and this is a video you can't afford to miss.
00:40The report we'll be summarizing today is titled, quote,
00:43Bitcoin-enhanced treasury bonds, an idea whose time has come. It was published by the Bitcoin
00:49Policy Institute and is actually a policy brief, which is basically a policy recommendation.
00:55We'll leave a link to the full report in the description for you to come back and read later.
01:00Now, the report begins with something I'm sure a lot of you had forgotten by now,
01:04and that's Trump's executive order to create a strategic Bitcoin reserve in early March.
01:09The report highlights the fact that this gave Bitcoin legitimacy as an asset,
01:14specifically as a store of value asset like gold. The report's authors underscore the fact that the
01:19executive order instructed the treasury department and the commerce department to find ways of
01:24accumulating more BTC without costing the taxpayers money. They explained that the Bitcoin bonds
01:30described in their report essentially build on those instructions. Not only that, but the Bitcoin
01:37bonds described in the report will also create demand for US bonds at a time when the government
01:42needs to refinance its debts. To put things into perspective, the US government will need to
01:48refinance roughly 14 trillion dollars of debt over the next three years. This is a bigger problem than
01:54you think, because interest rates right now are much higher than they were when the US government
01:59initially borrowed this money. And this means its debt would have to be refinanced at a much higher
02:04interest rate, resulting in more tax revenues going toward paying interest. And this begs the question,
02:11of what Bitcoin bonds are and how they could help solve this problem. The answers are that Bitcoin
02:17bonds effectively combine US treasuries with Bitcoin, with the US treasuries offering a small yield and
02:22investors being compensated for this small yield with higher Bitcoin returns. If you're confused,
02:29don't worry, the report gives a simple example to explain how exactly this would work. First,
02:35a Bitcoin bond would be issued and 90% of this bond would consist of US treasuries offering a low
02:40yield, such as 1%, and the remaining 10% of the bond would go towards accumulating Bitcoin.
02:46Logically, issuing a 10-year treasury at a 1% yield would make it possible for the US government to
02:52refinance itself well below the current level of interest, which is around 4-5% at the time of
02:58shooting. Obviously, bond investors would normally not accept such a low yield. They would want a higher
03:04return. And that's where the Bitcoin comes in. The rationale is that 10% allocation to Bitcoin will
03:11provide the returns that bond investors would otherwise get through yields. The report specifies
03:16that investors in Bitcoin bonds would get 100% of the upside up to 4.5% compounded and 50% of any gains
03:25gains beyond that. As for the remaining 50%, well, this would go to growing the US's strategic Bitcoin
03:31reserve. Of course, the reason for providing 100% of the upside up to 4.5% would be to practically act
03:39as a 4-5% yield that investors would demand from regular 10-year treasuries. For context,
03:44Bitcoin's annualized return has been 100% since it launched, so a target of 4.5% annualized is certainly
03:52achievable over the next 10 years. The result would be the US refinancing its debt at a significantly
03:58lower interest rate, accumulating large amounts of Bitcoin without costing taxpayers money, and
04:03simultaneously pumping up Bitcoin's price. And by the way, if you're enjoying this video so far,
04:09then be sure to smash that like button to let us know. And if you're not subscribed to the channel yet,
04:14well, you can change that right now by hitting the subscribe button. And you may as well hit the
04:18bell as well to make absolutely sure you don't miss our upcoming videos. Now, this begs the bigger
04:23question, and that's why investors would want to invest in Bitcoin bonds. And the answer has to do
04:29with its unique risk-reward profile. Bitcoin bonds are low risk because they mostly consist of US
04:36treasuries, which are technically the safest assets you can have in the financial system. Notably, the way
04:41the Bitcoin bond is structured means that even if Bitcoin was to go to zero, bond investors would
04:47technically get all their money back when the bond matures because that one percent yield on the US
04:52treasury portion would make up for the Bitcoin that was lost. And this is where things get very
04:59interesting. It's very interesting. In theory, bond investors getting all their money back when the
05:04Bitcoin bond matures would not be worth it because chances are that this money would be worth less
05:10than it was when adjusted for inflation. However, this assumes that the 10% allocated to Bitcoin would
05:16go to zero during this period. In practice, it could be argued that the only way Bitcoin would ever go
05:22to zero during this period would be if there was deflation, in which case the Bitcoin bond would
05:27theoretically be worth the same or even more in real terms by the time the bond matures. But so long
05:32as there's inflation, Bitcoin should continue to rise. And that's just because Bitcoin has a fixed
05:38supply, whereas fiat currency has an infinite supply. The more that governments and central banks print
05:44money, the more that Bitcoin will appreciate all else being equal. So unless there's something like
05:50a quantum attack on Bitcoin, BTC probably won't be going to zero. And you can learn more about how
05:56quantum computing could affect Bitcoin by checking our video right over here. Moving on. To quickly recap,
06:03even if Bitcoin went to zero, Bitcoin bondholders would get 100% of their initial investment back
06:08due to the 1% annual interest rate on the US treasuries within the Bitcoin bonds. The only
06:12scenario within which Bitcoin would go to zero is if there was deflation, which is objectively unlikely.
06:18And even if there was deflation, then Bitcoin bondholders could actually end up with more money
06:23in real terms. And this ties into the reward side of the equation. You'll recall that Bitcoin's
06:28annualized returns since its launch have been over 100%. It goes without saying that this figure is
06:34inflated by Bitcoin's early years when its price went parabolic, so let's be much more conservative
06:40and assume a 10% annualized return from now. With a 10% annual return, the value of the 10%
06:46Bitcoin allocation in a Bitcoin bond issued today could theoretically grow by 2.6 times over 10 years.
06:52The result would be a 126% return when you factor in the 1% earned on the 90% allocation to US treasuries.
07:00And I should note that this is actually lower than just holding 100% in 10-year treasuries.
07:06For reference, a normal US 10-year treasury bond yielding 4.5% annualized would be a 155% return at the
07:13end of the duration of the treasury. The catch is that the calculation that we just did with Bitcoin
07:18is extremely conservative. There's also theoretically no limit to how high Bitcoin could go, whereas
07:25there is a limit to the 4.5 interest rate on a fixed treasury bond. In other words, the rewards
07:30of holding 90% US treasuries with a 1% yield plus 10% Bitcoin could be exponentially higher than
07:37just holding 100% of US treasuries yielding 4.5% annualized. As a cherry on top, the US government
07:45gradually grows its Bitcoin pile, further restricting the supply and increasing Bitcoin's price. More on
07:51that later. Oh, sorry, I just had to take a break from that video to check the CoinBureau deals page.
07:58You know, the one place you'll go to get exchange signup bonuses of up to $100,000 and trading fee
08:04discounts of up to 70%? Or how about discounts on hardware wallets as well as exclusive Altcoin Alpha
08:12in the CoinBureau Club? Well, more information in the description. Now, back to the video.
08:18Anyways, in the next part of the report, the authors assess the financial benefits that Bitcoin bonds
08:24would have for the US government. They start by noting that if the US government was to refinance
08:29$2 trillion of debt using 10-year treasuries at the current rate of around 4.5%, then the US
08:35government would be stuck paying $90 billion per year in interest for the duration of the bond.
08:41If the US government was to use a 10-year Bitcoin bond, however, the interest rate would be just 1%
08:47on the US Treasury portion, resulting in an annual interest payment of just $20 billion.
08:52Over the course of 10 years, the government would save $700 billion in interest expense, which is
08:58very big. To give you a sense of just how big this is, the authors note that the $70 billion
09:05per year that would be saved is how much it costs to finance the whole entire Department of Homeland
09:10Security. And the authors also stress that these savings could be achieved without raising taxes
09:16or cutting spending. Next, the authors assess how much Bitcoin the US government could accumulate
09:21because of the Bitcoin bonds, as well as the value of their Bitcoin stash in the future. As you can
09:27see, they provide a wide range of outcomes from $800 billion to over $300 trillion over a 10-year duration.
09:35Naturally, the first scenario seems to be a bit more realistic, as it assumes a Bitcoin price of
09:40$1.25 million in 2035. The other scenarios are much less realistic, as they assume a Bitcoin price of
09:47$274 million per coin in 2035. It's safe to say that we would be living through some truly hyperinflationary
09:55times if that were to happen. Anyhow, under the realistic scenario, the US government would accumulate
10:00roughly 2.2 million BTC in its strategic Bitcoin reserve by 2035 thanks to the Bitcoin bonds. The US
10:07government currently holds around 200k in Bitcoin, so 2.2 million BTC would be an 11 times increase
10:13from their current holdings. With a Bitcoin price of around 1.25 million per coin, that would translate
10:19to over $2.7 trillion. It's important to note that this calculation assumes an average annualized return
10:27of around 36% for Bitcoin, which the report authors note is a conservative estimate. You'll remember that
10:33we used an average annualized return of 10% in our previous example. From the author's perspective,
10:39the gains will be much bigger. In fact, they believe that if the US government was to embark on a Bitcoin
10:45bond program between now and 2045, it could accumulate more than $50 trillion worth of Bitcoin
10:52that could be used to offset or pay off the US government's debt. And the authors also have a plan
10:58about how to further increase investor demand. And that would be to exempt Bitcoin bond holders from
11:05taxes, both on the yield from the US treasuries and the returns from the Bitcoin. They note that
11:10this would make them a low-risk, high-reward way for Americans to build generational wealth,
11:16and they even calculated the potential returns. As you can see, the authors again present a wide range
11:22of returns from 7% per year to 65% per year. And I'll remind you that the higher-end estimates assume
11:28a Bitcoin price of $274 million per coin in 2035, which is ambitious to put it lightly. Even so,
11:36the author's conservative estimate looks good at first glance. The caveat is that this would only
11:42offset the 7% loss in purchasing power that occurs each year because of money printing, but we'll come
11:48back to that a bit later. Now, in the next part of the report, the authors attempt to assess the
11:53potential demand for Bitcoin bonds. They start by explaining the various benefits Bitcoin bonds
11:58have for different investors, such as easy BTC custody and compliance for institutional investors,
12:04diversification for foreign investors, and savings for retail investors. They note that 132 million
12:10American households could invest as much as $3k each. To be honest, it's not entirely clear how they
12:16arrive at this answer, but we suspect it has to do with this infographic over here, which shows that
12:2220% of US treasuries are currently bought by US households, with the remaining 80% being purchased by
12:28institutional investors and foreign investors. The authors assume that we will see a similar split
12:33for Bitcoin bonds, which is a bit of a stretch in our view. In any case, in case you're not convinced,
12:39the authors provide this handy infographic that breaks it all down. The savings, the upside,
12:44the amount of debt that can be offset, and the advantages for both retail and institutional
12:49investors of all kinds. All that's missing is the risks, which the authors address directly.
12:56They start with the elephant in the room, and that's that Bitcoin has historically been incredibly
13:01volatile, and that's precisely why they limit the Bitcoin allocation to just 10%. Any more than this
13:07could leave investors open to losses if Bitcoin went to zero, and any less, and they would result in
13:13much lower potential returns. To their credit, the authors do acknowledge another issue, and that's
13:19the fact that Bitcoin purchases associated with Bitcoin bonds would likely cause Bitcoin's price
13:23to rally a lot. And they argue that this could be mitigated through dollar cost averaging and over
13:29the counter sales, but to be honest, this is a bit doubtful. The actual speculation from investors
13:35about the Bitcoin bonds could result in lots of buys of Bitcoin on the spot markets. Then, the authors talk about
13:41other more basic risks, such as those related to holding such a large amount of Bitcoin in custody,
13:47regulatory risks such as classification of Bitcoin bonds as assets, given that they consist of
13:52security and a commodity, and the international and public perception of Bitcoin bonds. To mitigate
13:58against these risks and others, the report's authors recommend starting with a pilot program that could be
14:03launched by the President's Working Group on Digital Assets. And this pilot program would last for about
14:08three to six months and involve five to ten billion dollars to ensure that the Bitcoin bonds work as
14:13intended. Assuming the pilot is successful, the authors recommend that there be a quote,
14:19policy and expansion period lasting for anywhere between six to twelve months, with Congress preparing
14:25any related legislation, and the Treasury Department scaling up the Bitcoin issuance to 100 to 200 billion
14:30dollars. Assuming this expansion period is successful, the authors then recommend a full implementation over the
14:37course of 12 to 24 months, targeting up to 20 percent of the U.S. government's financing needs.
14:43And this would be done with the help of other key entities such as the Federal Reserve and various
14:47market participants. After reviewing a few other non-financial benefits that the Bitcoin bonds could
14:53have, such as showcasing America's leadership in innovation and competitiveness, the authors conclude by
14:58reiterating that Bitcoin bonds are a logical continuation of the Trump administration's pro-crypto
15:04executive orders and goals. They also provide a five-point plan for policymakers to make Bitcoin
15:09bonds a reality, direct the Treasury Department to analyze their feasibility, assess the ideal balance
15:14of U.S. Treasuries to Bitcoin as well as the ideal yield on Treasuries, draft related legislation,
15:20namely around taxes, design a strategy to integrate Bitcoin bonds into the strategic Bitcoin reserve,
15:25and assess their effectiveness once they've launched. All we're wondering is why someone wouldn't just
15:31opt to hold 90% U.S. Treasuries and 10% Bitcoin. That way they could earn a 4.5% yield instead of
15:38a 1% yield, and they'd also be able to capture 100% of Bitcoin's upside rather than just 50% above the
15:444.5% annualized return included in the Bitcoin bonds. This would surely be much better, no?
15:52And this brings me to the big question, and that's what Bitcoin bonds could mean for Bitcoin and the
15:57broader crypto market. The answer ultimately depends on if they're ever implemented. For the time being,
16:02this doesn't seem likely, but for the sake of education, let's assume that Bitcoin bonds launch
16:08in the coming months. Besides the speculative pump that would accompany their initial launch,
16:12the effects they would have on Bitcoin and the crypto market more broadly would fundamentally depend on
16:17demand. The more demand there is, the more Bitcoins will rise, as 10% of every Bitcoin bond would go
16:24towards buying BTC. And what's fascinating about the Bitcoin bonds is that, unlike the spot Bitcoin ETFs,
16:31the BTC backing the bonds would not be sold whenever someone sells a Bitcoin bond. The only time that
16:37Bitcoin would be sold would be to pay out the yields to Bitcoin bond holders. In practical terms,
16:43this means that Bitcoin bonds would significantly restrict Bitcoin's circulating supply, which
16:48is a bit of a double-edged sword. On the one hand, this would make Bitcoin's price rise even more,
16:54which could incentivize more Bitcoin bond buyers. On the other hand, though, this would make Bitcoin's
16:59price extremely volatile, which could result in Bitcoin bond holders panic-selling if Bitcoin was to
17:05crash because of, say, a publicly traded company dumping Bitcoin. Now, as for the wider crypto market,
17:11Bitcoin bonds could be bullish for altcoins because of the effects that they could have on interest
17:16rates. If there was lots of demand for Bitcoin bonds, then the yield on US treasuries would
17:21eventually fall. This would cause long-term interest rates to fall and risk assets to rally. With all
17:27that said, though, we don't believe there would be much demand for Bitcoin bonds if they were launched,
17:32and that's because of the two things we've mentioned earlier. The first is the conservative annualized
17:37return of 7% for Bitcoin bond holders, a return that's just enough to offset currency depreciation.
17:43Newsflash, but if you're not invested in something that's earning you more than 7% per year,
17:49you're falling behind. And the second thing that could dissuade investors from buying Bitcoin bonds
17:54is the fact that they would be better off just buying a combination of US treasuries earning 4.5%
18:00and just holding some Bitcoin. The annualized returns would be much higher over a 10-year period,
18:05even if the value of the US treasuries fell because of inflation. If you think about it,
18:10what this report shows us is that having a barbell strategy of US treasuries and Bitcoin
18:15is one of the most optimal from an investment perspective. Again, this is not a strategy you
18:20need Bitcoin bonds for. It's one you could easily do yourself, and you could even tweak the parameters
18:26as you see fit. Better yet, you could go 100% crypto by combining a yield-bearing stablecoin backed by
18:33US government debt with Bitcoin as the barbell strategy. The best part is that this barbell
18:39strategy is available to anyone, anywhere, and it could have the same effect as Bitcoin bonds,
18:45namely lowering the US government's debt burden. And that's because the more stablecoins there are,
18:51the more US treasuries get bought. And you can learn more about how stablecoins could subsidize the US
18:57government's spending by watching our video on that right over here. And if you're not subscribed to the
19:02channel yet, you can do that right over here. That's me for now. Thank you very much for watching,
19:06and I'll see you again soon.
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