- VanEck has proposed using BitBonds, a debt instrument that has been created to help the U.S. government alleviate its gigantic $14 trillion debt refinancing issue.
- BitBonds are expected to be 10-year bonds, with 90% invested in low-risk U.S. Treasury bonds and the remaining 10% in Bitcoin.
The U.S. government is currently saddled with the task of refinancing approximately $14 trillion worth of debt. It does this by retiring existing debt by issuing new bonds, typically U.S. Treasury bonds, which are low-risk and widely considered to be safe by investors.
But a new initiative by Matthew Sigel, a VanEck digital asset strategist, is attempting to shake this strategy by introducing a new financial product: BitBonds. The hybrid bonds combine the conservatism of traditional Treasuries with the upside of digital assets, in this case, Bitcoin (BTC). BitBonds would be “90% Treasury + 10% BTC,” Sigel states.
When BitBonds are purchased by investors, 90% of their funds go into standard government bonds, keeping them safe and stable. The remaining 10% is used to purchase Bitcoin, exposing the bond to the Bitcoin market. This allows investors to reap the secure returns of Treasury bonds while benefiting from potential upside from the long-term value of Bitcoin.
What’s in It for Investors?
BitBonds guarantee a full return of the Treasury portion after 10 years. If the Bitcoin portion appreciates, investors receive all profits up to a 4.5% annualized return. Any gains beyond that threshold are split equally between the investor and the government. As Sigel explained, the breakeven Bitcoin compound annual growth rate (CAGR) ranges from 8% to 17%, depending on the bond’s coupon rate.
While lower-coupon bonds may be less appealing if Bitcoin underperforms, Sigel emphasizes that even in the worst-case scenario, BitBonds offer cheap funding; in the best case, they provide “long-vol exposure to the hardest asset on Earth.” This makes them attractive to investors who seek a blend of security, inflation protection, and upside potential.
For the U.S. government, BitBonds offer a way to diversify its debt refinancing strategy. They allow the government to gain exposure to Bitcoin’s potential without fully committing taxpayer funds, and they may attract a new wave of crypto-savvy, younger investors. The concept has also received backing from the Bitcoin Policy Institute (BPI), which supports BitBonds as a response to President Donald Trump’s March 6 Executive Order establishing a Strategic Bitcoin Reserve.
According to the BPI, the BitBonds framework is engineered to meet four key objectives: reduce the interest burden on Treasury bonds for immediate fiscal relief, expand the nation’s Strategic Bitcoin Reserve at no additional cost to taxpayers, provide American families with a tax-advantaged savings vehicle that blends security and growth, and offer a long-term solution to lowering federal debt through asset appreciation rather than raising taxes or cutting spending.
The BPI report reads, “ Detailed financial analysis indicates that implementation of the BitBonds program at the proposed scale of $2 trillion (approximately 20% of 2025 refinancing needs) could generate annual interest savings of $70 billion compared to conventional Treasury issuance.” At press time, the asset was trading at $84,125 after surging by 10.29% on its weekly chart.
