The U.S. government is currently saddled with the task of refinancing approximately $14 trillion worth of debt.
It does this by retiring existing debt by issuing new bonds, typically U.S. Treasury bonds, which are low-risk and widely considered to be safe by investors.
But a new initiative by Matthew Sigel, a VanEck digital asset strategist, is attempting to shake this strategy by introducing a new financial product: BitBonds. The hybrid bonds combine the conservatism of traditional Treasuries with the upside of digital assets, in this case, Bitcoin (BTC). BitBonds would be “90% Treasury + 10% BTC,” Sigel states.
When BitBonds are purchased by investors, 90% of their funds go into standard government bonds, keeping them safe and stable. The remaining 10% is used to purchase Bitcoin, exposing the bond to the Bitcoin market. This allows investors to reap the secure returns of Treasury bonds while benefiting from potential upside from the long-term value of Bitcoin.
What’s in It for Investors?
BitBonds guarantee a full return of the Treasury portion after 10 years. If the Bitcoin portion appreciates, investors receive all profits up to a 4.5% annualized return. Any gains beyond that threshold are split equally between the investor and the government. As Sigel explained, the breakeven Bitcoin compound annual growth rate (CAGR) ranges from 8% to 17%, depending on the bond’s coupon rate.
While lower-coupon bonds may be less appealing if Bitcoin underperforms, Sigel emphasizes that even in the worst-case scenario, BitBonds offer cheap funding; in the best case, they provide “long-vol exposure to the hardest asset on Earth.” This makes them attractive to investors who seek a blend of security, inflation protection, and upside potential.
For the U.S. government, BitBonds offer a way to diversify its debt refinancing strategy.
They allow the government to gain exposure to Bitcoin’s potential without fully committing taxpayer funds, and they may attract a new wave of crypto-savvy, younger investors. The concept has also received backing from the Bitcoin Policy Institute (BPI), which supports BitBonds as a response to President Donald Trump’s March 6 Executive Order establishing a Strategic Bitcoin Reserve.
According to the BPI, the BitBonds framework is engineered to meet four key objectives: reduce the interest burden on Treasury bonds for immediate fiscal relief, expand the nation’s Strategic Bitcoin Reserve at no additional cost to taxpayers, provide American families with a tax-advantaged savings vehicle that blends security and growth, and offer a long-term solution to lowering federal debt through asset appreciation rather than raising taxes or cutting spending.
The BPI report reads, “Detailed financial analysis indicates that implementation of the BitBonds program at the proposed scale of $2 trillion (approximately 20% of 2025 refinancing needs) could generate annual interest savings of $70 billion compared to conventional Treasury issuance.” At press time, the asset was trading at $84,125 after surging by 10.29% on its weekly chart.