VanEck says strategic Bitcoin reserve could hold up to 35% of US debt by 2050

Investment manager VanEck has projected that the Bitcoin Reserve, as proposed under Senator Cynthia Lummis’s BITCOIN Act, could hold up to 35% of the US  national debt by 2050. This will offset about $42 trillion of the country’s liabilities, it claimed.

The VanEck analysis assumes that the national debt will compound by 5% between 2025 and 2049, starting at $37 trillion. This is an optimistic estimate given that the rate over the last ten years has been 10%. It further assumes Bitcoin will compound at 25% annually over the same period from the 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 US have a reserve of one million Bitcoins by 2029, is enacted, the value of the reserve 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, VanEck’s Head of Research, Matthew Sigel, argued that Bitcoin has actually been growing at a 50% CAGR over the last 10 years. Thus, 25% is a conservative assumption.

VanEck’s Head of Research says the Bitcoin acquisition will benefit the US dollar

Sigel has now further affirmed his opinion on the benefits of a Bitcoin Reserve for the US. In a recent post countering an article by crypto investor Nic Carter against a Bitcoin Reserve, Sigel noted that now is the best time for the US to have a Bitcoin reserve.

He explained that the US debt burden has been the major factor preventing it from having a reserve, but it can now start with Bitcoin to position itself for the future. The analyst noted that Bitcoin can be a complementary asset that will strengthen the US dollar, and the belief of many that the adoption of Bitcoin by the US will undermine the dollar could not be more wrong.

He said:

“Bitcoin doesn’t have to undermine the dollar. As in an investor portfolio, a small position is simply a hedge against fiscal unsustainability and geopolitical uncertainty, which can strengthen our asset base and impose some discipline on the Central Bank.”

Sigel also believes that Carter overestimates how the market will react to the US government acquiring Bitcoin. In his view, there is gradual mainstream adoption and some political will at present; together, these will be enough to lay the foundation for the reserve and build on it with time.

Bitcoin reserve will not cost US $1 trillion; can be a gradual process

Meanwhile, Sigel also clarified in his post that the Bitcoin reserve will not impose an additional cost burden on the US. Based on VanEck estimates, it will cost the US around $320 billion to own one million BTC. However, he believes that accumulation could be a gradual process, giving the US a first-mover advantage and expanding with time.

In the expert’s opinion, such an advantage has strategic benefits for the US government. BTC’s neutrality makes it ideal as a reserve asset and allows the country to retain its leading position in innovative technology, he said.

He added that Bitcoin could also benefit the US energy strategy as it incentivizes energy infrastructure development. Sigel said:

“Bitcoin mining incentivizes the development of domestic energy infrastructure, including renewables, nuclear, and grid resiliency projects. This aligns with US strategic goals for energy independence and sustainability.”

With the two experts arguing for and against Bitcoin, the crypto community remains divided on whether it would be a good idea. Most of those opposing it are concerned it will not benefit the US dollar and might lead to the government taking control of Bitcoin.

Nevertheless, the possibility of the US having an SBR is currently limited as the Federal Reserve chair Jerome Powell said the government cannot buy Bitcoin. It remains to be seen whether the next administration can change this position.

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