A new study by Bitwise, a crypto asset management firm, indicates that Bitcoin (BTC) could serve as a protective measure against risks associated with sovereign defaults. This comes at a crucial time when the world is reaching alarming debt-to-GDP ratios, raising fears of an impending global debt crisis.
Is Bitcoin an Answer to Global Debt Issues?
The study identifies Bitcoin as a viable option for investors looking to secure their wealth during events like sovereign defaults or hyperinflation. It notes:
In theoretical scenarios, Bitcoin can act as “portfolio insurance” against the risk of default from a selection of significant sovereign bonds, with an estimated “fair value” of about $219,000 based on these assumptions.
Contextually, global public debt is on the rise, with the US alone surpassing $36 trillion in public debt, representing 123% of its GDP. Alarmingly, just since September 2024, the national debt has increased by $917 billion in a very short timeframe.
This trend of escalating debt isn’t confined to the US; countries like France and the UK are also recording significant surges in public debt, creating worry for bond investors.
According to the Bitwise analysis, Bitcoin serves as a stronger alternative to gold during such financial uncertainties, as its decentralized network functions independently, contrasting with sovereign bonds that hinge on the government’s repayment capability.
The report further indicates that the likelihood of default among G20 nations over the next ten years stands at 6.2%, while the US holds a slightly better rate at 4.5%. It states:
This model suggests a “fair value” of approximately $219,000 per BTC. In a highly unlikely scenario where all G20 bonds default simultaneously, one BTC’s theoretical “fair value” could jump to roughly $3.5 million.
That being said, the report indicates that major economies are not expected to default in the near future. Nonetheless, the theoretical models suggest significant potential for BTC’s price if such extreme conditions were to occur.
Bitcoin Remains Stable Amid Economic Challenges
Since the market downturn caused by the pandemic in March 2020, Bitcoin has shown strong resilience, maintaining its value despite numerous macroeconomic challenges over the last five years. For example, BTC demonstrated its strength when the US Federal Reserve announced plans to reduce interest rate cuts in 2025.
Furthermore, the revival of the Bitcoin ‘kimchi premium’ during South Korea’s political unrest in December illustrates investors’ tendency to favor BTC for wealth preservation during uncertain times. Currently, BTC is priced at $105,761, having increased by 1.2% in the last 24 hours.
