Could Bitcoin Pay Off the U.S. National Debt? Here’s What It Would Take…
In the face of a towering $36 trillion national debt, the idea of the U.S. paying it off with Bitcoin may sound like a tech investor’s dream—or a wild thought experiment. But let’s take a serious look: if the U.S. government used its Bitcoin holdings as a means to pay off this debt, how valuable would each Bitcoin need to be? At the time of writing, the U.S. government holds 208,109 Bitcoin, and each Bitcoin is valued at about $90,000. Could Bitcoin be a national debt solution?
1. The Debt: Understanding America’s $36 Trillion Liability
The U.S. national debt currently sits at $36 trillion. This debt has grown steadily due to a range of factors, from borrowing to fund government programs to economic stimulus efforts and interest on past debts. For context, here’s what $36 trillion represents:
- It’s around $100,000 for every person in the U.S.
- More than the combined annual GDPs of the world’s four largest economies (excluding the U.S.).
- It’s close to 150% of the entire U.S. GDP.
This level of debt carries real-world consequences, such as influencing inflation, interest rates, and even America’s fiscal future. So, would Bitcoin’s limited supply and increasing popularity make it a viable tool for paying off this debt?
2. Bitcoin: An Emerging “Digital Gold”
Bitcoin, often called “digital gold,” has a capped supply of 21 million coins, meaning it’s designed to be scarce. With no central bank controlling it, Bitcoin operates as a decentralized digital currency. Given these features, some see it as a hedge against inflation—a store of value that, unlike fiat currency, cannot be devalued by simply printing more.
The U.S. government currently holds 208,109 Bitcoin. This stash, worth around $18.7 billion at today’s price of $90,000 per Bitcoin, is a small fraction of the total debt. However, if Bitcoin’s price were to rise significantly, the government’s Bitcoin could theoretically become a valuable asset for debt management.
3. Crunching the Numbers: How Valuable Would Each Bitcoin Need to Be?
To determine how high Bitcoin’s price would need to climb for the government to cover the $36 trillion debt with its current holdings, we can use a simple formula:
Required Bitcoin price = Debt / Bitcoin holdings
Given:
- Debt = $36 trillion, or $36,000,000,000,000
- Bitcoin holdings = 208,109 BTC
So,
Required Bitcoin price = 36,000,000,000,000 / 208,109 ≈ 173,000,000
Each Bitcoin would need to be worth approximately $173 million for the U.S. to use its Bitcoin holdings to pay off the entire $36 trillion debt.
That is, assuming the US doesn’t aquire any more Bitcoin than it already has – which eventually it very likely (surely?) will!
Note: If the US government could aquire ten times the amount of Bitcoin that they have now (which wouldn’t be too hard for them to do) then this $173 million figure would lessen by a factor of ten, i.e. $17.3 million.
Then again: the UNFUNDED US debt is actually somewhere in the region of over $100 trillion – so there’s that to eventually factor in as well!
Note to mention the whole subject of inflation and potentially hyperinflation risks if Bitcoin gained massive global adoption…
4. What Would Drive Bitcoin to $173 Million?
A Bitcoin price of $173 million might seem unthinkable, but the factors that could push it there are interesting to consider:
- Global Adoption and Demand: For Bitcoin to reach such extraordinary values, it would need to become widely adopted as a store of value across the globe, perhaps even more widely accepted than gold. The use of Bitcoin as a hedge against currency devaluation or inflation would have to become near-universal.
- Scarcity and Demand Dynamics: With a fixed supply of 21 million, Bitcoin’s scarcity would become increasingly influential in its price, especially if large institutions, governments, countries, and/or wealthy individuals began holding significant amounts of Bitcoin, taking it out of circulation.
- Monetary and Fiscal Policy Shifts: If governments worldwide faced major inflationary pressures on their currencies, Bitcoin could become an attractive alternative asset for national reserves. A shift in fiscal policy to embrace Bitcoin as a reserve asset would add a level of institutional stability to its valuation, potentially driving up the price.
5. Bitcoin as a Debt Solution: A Feasible Fantasy?
Even if Bitcoin were to reach such astronomical valuations, using it to directly address national debt would be challenging:
- Volatility: Bitcoin’s value fluctuates widely, which could make it risky for governments to rely on it as a stable financial asset to offset debt.
- Policy Constraints: Governments would likely face complex regulatory and policy challenges in converting Bitcoin into debt repayments, especially in the context of international financial systems.
- Public Perception and Utility: Bitcoin’s decentralized nature, while appealing to some, may be seen as a limitation for broader government use. Many citizens and policymakers would likely want the U.S. dollar to remain the primary national asset.
Final Thoughts: Bitcoin’s Role in National Finance
While it’s unlikely that Bitcoin will single-handedly solve the U.S. national debt issue, exploring these numbers shows us the potential and limitations of Bitcoin in the world of national finance. For Bitcoin to reach $173 million per coin, we’d need to see a fundamental shift in global finance, with Bitcoin becoming a primary asset for individuals and institutions alike. While that future will likely never come to pass, Bitcoin’s limited supply and increasing interest as a store of value give it an intriguing role in the economy.
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