Key Insights:
VanEck estimates that Bitcoin could help manage the US Debt Crisis by 36% in 2050.
The report estimates Bitcoin to grow $42.3 million by 2049, with a CAGR of 25%, much lower than Bitcoin's actual growth rate of 109% since 2009.
The US Govt. must procure an additional 800k BTC for this task.
The usage of Bitcoin inside the US Government was also suggested by Donald Trump and Robert F. Kennedy Jr.
Top wealth manager VanEck estimates that if the US takes the Bitcoin way forward, it could settle 36% of the US Debt ($42 trillion) by 2050 which is estimated to grow by 5%, reaching 119.3 trillion by 2050.
In the same time, Bitcoin would need to grow by a 25% annual growth rate to reach $42.3 million per BTC. Since 2009, Bitcoin has been growing at a rate of 109% CAGR.
VanEck notes that the US government would need a total of 1 million BTC to fulfill this task.
At present, the US government holds around $19.5 billion worth of Bitcoins, or roughly 200k BTC. The Lummis Bill could help the US government source another 800k BTC by selling other assets such as a portion of its Gold Reserves (currently $455 billion). Gold has underperformed BTC by a huge margin in the last 14 years.
Behind this report, Van Eck assumes that the price per Bitcoin would rise to $42.3 million a piece by the year 2049. Though this might sound a lot more exaggerated, it is much within reality. This would take the US government Bitcoin reserves to $42 trillion.
Previously, similar suggestions were made by Robert F. Kennedy and Donald Trump, both of whom suggested using Bitcoin to stabilize the US Economy. Kennedy suggested the solution during the 2024 Bitcoin Miami conference, while Trump suggested using Bitcoin to back the US Dollar during the run-up to the US elections in 2024.
US Debt Scenario 23 Dec 2024
The US Department of Treasury
The total Federal Debt in the US is around $33 trillion, which is 23% higher than the US GDP. Simply put, the debt could not be paid even if everyone in the country worked for an entire year and donated 100% of their total earnings.
Debt has been used by governments across the world to fund schemes of public benefit when the revenue falls short to cover all the government expenses.
The debt is mostly in the form of borrowings from the central bank of the country (here, the Federal Reserve), which prints the currency and hands it over to the government.
All governments have to pay an interest on this money, or otherwise, it would create an endless printing and devaluation cycle like Venezuela.
At present, the US Government pays 14% of its total spending to service debt interests. If the total debt rises in the future, the government will see this value rise further until it has to cut basic spending to fund debt interests or risk devaluing the US Dollar.
Sam Altman tweeted this graph in 2023, saying that if it were not to be managed, the debt situation would get far more scary than ever.
At present, the US government holds 123% debt as compared to GDP. This means that there is a risk of running into a debt spiral where the US Government has to borrow more money to service this higher debt.
The Department of Government Efficiency, led by Vivek Ramaswamy and Elon Musk, seeks to control fiscal leakage and unnecessary spending as soon as Trump assumes power in Jan 2025. This department is expected to limit the US Debt's growth to a certain extent.
However, since the debt has already crossed the GDP, it would need a much faster-growing asset like Bitcoin to help stabilize it to a great extent.
Bitcoin maximalist and top investor Michael Saylor, in a recent presentation, highlighted that Bitcoin grew more than any asset and beat inflation by a huge margin of 47%.
Further, in the last 4 years, Bitcoin grew by 60% CAGR. Based on these, Saylor predicted a price of $52 million per Bitcoin.
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