Bitcoin Reserve Could Reduce US Debt Crisis by 35% by 2049, Says VanEck

While the head of a US nonprofit think tank believes a Bitcoin reserve won't fix the US debt crisis, VanEck sees it as a savior.

The U.S. debt ceiling has been rising steadily over the years due to several factors, including increasing federal spending, economic changes, and accumulating debt. Currently, the national debt stands at $36.13 trillion.

One interesting proposal that has emerged in recent times is the idea of a Bitcoin reserve to help offset a portion of the U.S. debt. This concept has been discussed in the context of the BITCOIN Act, which aims to establish a Strategic Bitcoin Reserve as part of the nation's financial framework.

The act proposes that the U.S. government acquire up to one million Bitcoin over five years, with a maximum of 200,000 Bitcoin purchased annually. These holdings would be stored securely across decentralized storage facilities in the country and held for at least twenty years.

According to financial institution VanEck, if the U.S. were to purchase 1 million Bitcoin and hold them until 2049, while Bitcoin's value continues to rise significantly, this reserve could help offset a large portion of the national debt by 2049—around 35% of it, or about $42 trillion.

This scenario assumes that the national debt grows at 5% yearly, and Bitcoin's price increases much faster at 25% yearly, starting from $200,000 in 2025 and reaching over $42 million per Bitcoin by 2049. In this case, Bitcoin would also become a major part of the global financial system, making up 18% of all global financial assets by 2049.

However, it's important to note that this is an optimistic scenario that depends on both Bitcoin's price and the U.S. government's strategy. Several other factors, such as economic conditions, technological advancements, and geopolitical events, could influence the outcome.

Massive US debt

The growth of the U.S. national debt over the years can be understood through several key phases. After World War II, the debt was quite high, exceeding 100% of GDP in the mid-1940s due to war-related expenses. However, strong economic growth in the following decades helped stabilize or reduce the debt-to-GDP ratio.

In the 1980s, the debt began to rise significantly, driven by tax cuts, increased military spending, and slower economic growth. By the end of that decade, the debt had tripled, growing from around $900 billion in 1980 to over $2.7 trillion.

During the 1990s, there was a temporary slowdown in debt growth as economic growth, spending controls, and tax increases led to reduced budget deficits and even surpluses by the late 1990s.

The early 2000s marked a return to deficits due to tax cuts, the wars in Iraq and Afghanistan, and increased domestic spending. The 2008 financial crisis accelerated this trend as the government borrowed heavily to rescue financial institutions and stimulate the economy.

By 2010, the debt had grown significantly and continued to rise throughout the decade due to ongoing deficits and increasing costs for programs like Social Security, Medicare, and Medicaid. Thirteen years later, the debt had climbed to over $33 trillion.

Additionally, the CBO said that the Federal debt is expected to rise from 78% of GDP in 2019 to 92% percent in 2029 and 144% in 2049. “That level of debt would be the highest in the nation’s history by far, and it would be on track to increase more.”

For VanEck, this path to heightened debt can be altered by the once ignored and dismissed cryptocurrency, Bitcoin. It explained that there is now more acceptance towards Bitcoin especially this year than any other time.

Acceptance of Bitcoin

Recently, both corporations and governments around the world have been showing increasing interest in Bitcoin. In Suriname, a presidential candidate, Maya Prabhoe, announced plans to replace the national currency with Bitcoin and to issue Bitcoin-backed bonds. In the United Kingdom, a pension fund, guided by the firm Cartwright, decided to invest 3% of its assets in Bitcoin, marking the first such move in the country.

Poland’s presidential candidate, Slawomir Mentzen, proposed creating a national Bitcoin reserve and expressed his desire to make the country a hub for cryptocurrency if elected while a Japanese lawmaker raised the idea of converting some of the nation’s foreign exchange reserves into Bitcoin, noting the global trend of Bitcoin adoption. Meanwhile, Vancouver, Canada, passed a motion to promote Bitcoin as a reserve asset and allow its use for tax payments.

Australia’s AMP retirement fund recently purchased $27 million worth of Bitcoin, becoming the first major pension fund in the country to do so. In France, a member