of US debt by 2050
Investment manager VanEck has predicted that Bitcoin reserves, as proposed under Senator Cynthia Lummis’ BITCOIN Act, could hold up to 35% of the US national debt by 2050. This would offset about $42 trillion of the country’s liabilities, he claimed.
Van Eck’s analysis projects that the national debt will double by 5% between 2025 and 2049, starting at $37 trillion. This is an optimistic estimate given that the rate over the past 10 years has been 10%. He also assumes that Bitcoin will double by 25% annually over the same period from a base of $200,000 in 2025.
Based on this assumption, Bitcoin would be worth $42.3 million by 2049. Thus, if the BITCOIN Act, which proposes that the United States have a reserve of 1 million Bitcoins by 2029, is enacted, the reserve value in 2049 would be $42 trillion.
However, many have considered the assumption that Bitcoin will have a compound annual growth rate (CAGR) of 25% over the next 25 years to be highly unlikely. In his response, Matthew Siegel argued that Bitcoin has already grown at a CAGR of 50% over the past 10 years. Therefore, the 25% figure is a conservative assumption.
VanEck's Head of Research Says Bitcoin Acquisition Will Benefit US Dollar
Sigel now has his say on the benefits of Bitcoin for the United States. In a recent post countering an article by cryptocurrency investor Nic Carter against Bitcoin, Siegel suggested that now is the best time for the United States to acquire Bitcoin.
He explained that the US debt burden was the main factor preventing it from having a reserve, but it can now start using Bitcoin to position itself for the future. The analyst pointed out that Bitcoin could be a complementary asset that would strengthen the US dollar, and that the belief of many that the US adoption of Bitcoin would undermine the dollar could not be more wrong.
He said:
“Bitcoin doesn’t necessarily have to undermine the dollar. As in an investor’s portfolio, a small position is simply a hedge against financial unsustainability and geopolitical uncertainty, which can bolster our asset base and impose some discipline on the central bank.
Siegel also believes that Carter is overestimating how the market will react to the U.S. government acquiring Bitcoin. In his view, there is gradual mainstream adoption and some political will at present; together, this will be enough to lay the foundation for a reserve and build on it over time.
Bitcoin Reserve Won't Cost $1 Trillion; Could Be Gradual Process
Meanwhile, Siegel also made it clear in his post that Bitcoin would not impose an additional burden on the United States. According to VanEck, it would cost the United States about $320 billion to own 1 million BTC. However, he believes that accumulation could be a gradual process, giving the United States a first-mover advantage and expanding over time.
The expert sees such a feature as having strategic benefits for the US government. He said Bitcoin’s neutrality makes it ideal as a reserve asset and allows the country to maintain its leadership position in innovative technology.
He added that Bitcoin could also benefit the US energy strategy by spurring the development of energy infrastructure. Siegel said:
Bitcoin mining stimulates the development of domestic energy infrastructure, including renewable energy, nuclear energy, and grid resilience projects. This is in line with the U.S. strategic goals of energy independence and sustainability.
With experts arguing for or against Bitcoin, the cryptocurrency community remains divided on whether it is a good idea or not. Most opponents worry that it will not benefit the US dollar and could lead to government control of Bitcoin.
However, the prospect of the US getting an SBR is currently limited as Federal Reserve Chairman Jerome Powell has said the government cannot buy Bitcoin. It remains to be seen whether the next administration will be able to change that position.