VanEck Proposes "BitBonds" to Monetize Bitcoin (BTC) Exposure as the US Treasury Seeks to Refine Financing Strategy

VanEck's head of digital assets research, Matthew Sigel, has proposed the introduction of “BitBonds,” a hybrid debt instrument combining US Treasuries with Bitcoin (BTC) exposure

A hybrid debt instrument tying U.S. Treasuries with Bitcoin (BTC) exposure could help manage the government’s looming $14 trillion refinancing requirement, according to VanEck.

The concept, presented at the Strategic Bitcoin Reserve Summit, aims to address sovereign funding needs and investor demand for inflation protection.

As part of the discussion, VanEck's head of digital assets research, Matthew Sigel, proposed “BitBonds”—10-year securities with 90% traditional U.S. Treasury exposure and 10% Bitcoin, funded by the bond sale proceeds.

At maturity, investors would receive the full value of the U.S. Treasury portion, amounting to $90 on a $100 bond, plus the current value of the Bitcoin allocation.

Moreover, investors would capture 100% of Bitcoin’s upside until their yield-to-maturity reaches 4.5%. After that threshold, any gains would be split between the government and bondholders.

This structure is designed to align the interests of bond investors, who are increasingly seeking protection from dollar debasement and asset inflation, with the Treasury’s need to refinance at competitive rates.

“It’s an aligned solution for mismatched incentives,” Sigel said.

Investor breakeven

According to Sigel’s projections, the investor breakeven for BitBonds depends on the bond’s fixed coupon and Bitcoin’s compound annual growth rate (CAGR).

For bonds with a 4% coupon, the breakeven BTC CAGR is 0%. However, lower-yielding versions have higher breakeven thresholds: 13.1% CAGR for 2% coupon bonds and 16.6% for 1% coupon bonds.

If Bitcoin CAGR remains within the 30% to 50% range, modeled returns escalate sharply across all coupon tiers, with investor gains reaching up to 282%.

Sigel said BitBonds would be a “convex bet” for investors who believe in Bitcoin as the instrument would offer asymmetric upside while retaining a base layer of risk-free return. However, their structure means investors bear the full downside of Bitcoin exposure.

Lower coupon bonds could generate steep negative returns in scenarios where BTC loses value. For example, a 1% coupon BitBond would lose 20% to 46%, depending on the level of Bitcoin underperformance.

Treasury benefits

From the U.S. government’s perspective, the core benefit of BitBonds would be lower borrowing costs. Even if Bitcoin appreciates modestly or not at all, the Treasury will save on interest payments compared to traditional 4% fixed-rate bonds.

According to Sigel’s analysis, the government’s breakeven interest rate is approximately 2.6%. Issuing bonds with coupons below that level would reduce annual debt service, generating savings even in flat or declining Bitcoin scenarios.

Issuing $100 billion in BitBonds with a 1% coupon and no BTC upside would save the government $13 billion over the bond’s life. If Bitcoin achieves a 30% CAGR, the same issuance could yield over $40 billion in additional value, primarily from the shared Bitcoin gains.

This approach would also create a differentiated sovereign bond class, offering the U.S. asymmetric upside exposure to Bitcoin and reducing its dollar-denominated obligations.

“BTC upside just sweetens the deal. Worst case: cheap funding. Best case: long-vol exposure to the hardest asset on Earth,” added Sigel.

The breakeven BTC CAGR for the government increases with higher bond coupons, reaching 14.3% for 3% coupon BitBonds and 16.3% for 4% coupon versions. In adverse BTC scenarios, the Treasury would only incur a loss if it issued higher-coupon bonds while BTC underperformed.

Trade-offs on issuance complexity and risk allocation

Despite the potential benefits, VanEck’s presentation acknowledges the structure’s shortcomings. Investors take on Bitcoin’s downside without full upside participation, and lower-coupon bonds become unattractive unless Bitcoin performs exceptionally well.

Structurally, the Treasury would also need to issue more debt to compensate for the 10% of proceeds used to purchase Bitcoin. Every $100 billion in funding would require an additional 11.1% to offset the BTC allocation.

The proposal suggests possible design improvements, including downside protection to shield investors from sharp BTC declines partially.