Based on a latest report by crypto asset supervisor Bitwise, Bitcoin (BTC) is well-positioned to perform as “portfolio insurance coverage” towards sovereign default dangers. The report comes at a time when international debt-to-GDP ranges are breaching new highs, sparking issues a few potential international debt disaster.
Bitcoin: A Resolution For International Debt Defaults?
The report highlights Bitcoin as an ‘attention-grabbing different’ for buyers looking for to protect their wealth throughout situations equivalent to sovereign defaults or hyperinflation. It states:
In a theoretical mannequin, Bitcoin can function “portfolio insurance coverage” towards the default of a basket of main sovereign bonds with a present “truthful worth” of round 219k USD primarily based on this mannequin.
To supply context, international public debt ranges are steadily climbing. Just lately, the US public debt surpassed $36 trillion, equating to 123% of the nation’s GDP. What’s extra regarding is the accelerated tempo of debt progress since September 2024, amounting to $917 billion in only a brief span.
This rising fiscal debt isn’t restricted to the US. Different main economies, equivalent to France and the UK, are additionally experiencing unprecedented will increase in public debt, elevating alarm bells for bond buyers.
The Bitwise report cites Bitcoin as a compelling different to gold in such situations. It highlights that Bitcoin’s decentralized community structure basically makes it a ‘trustless system,’ setting it aside from sovereign bond contracts, which depend on the issuer’s potential to repay its debt.
The report additionally mentions that the weighted common default chance for G20 nations over the subsequent decade is at the moment 6.2%. Compared, the US has a weighted common default chance of round 4.5%. The report notes:
Primarily based on this mannequin, this might indicate a “truthful worth” of Bitcoin of round $219,000 per BTC already. Within the unlikely occasion that each one G20 sovereign bonds would default concurrently, the theoretical “truthful worth” of 1 single BTC inside this mannequin would enhance to roughly $3.5 million.
That stated, the report emphasizes that main economies are unlikely to default within the short-term. Nevertheless, the aforementioned mannequin provides perception into the place BTC’s value may soar if such a state of affairs have been to happen.
Bitcoin Holding Regular Amid Macro Uncertainties
For the reason that March 2020 coronavirus crash, Bitcoin has largely remained resilient, regardless of going through important macroeconomic headwinds over the previous 5 years. For example, BTC value exhibited resiliency after the US Federal Reserve introduced its intention to sluggish rate of interest cuts in 2025.
Equally, the resurgence of the Bitcoin ‘kimchi premium’ throughout South Korea’s political disaster in December highlighted buyers’ desire for BTC as a wealth-preservation asset in occasions of uncertainty. At press time, BTC trades at $105,761, up 1.2% previously 24 hours.
Featured Picture from Unsplash.com, Charts from Bitwise and TradingView.com
