A recent proposal by Senator Cynthia Lummis could potentially reduce the United States’ national debt by 35% in the next 24 years if a reserve of 1 million Bitcoin is created. According to asset management firm VanEck, this estimate assumes a compounded annual growth rate (CAGR) of 25% for Bitcoin, which would increase its value from $200,000 in 2025 to $42.3 million by 2049.
VanEck’s Estimate and Assumptions
VanEck’s head of digital asset research, Matthew Sigel, and investment analyst Nathan Frankovitz made this estimate based on several assumptions:
- Bitcoin Price Growth: The duo assumed a CAGR of 25% for Bitcoin from $200,000 in 2025 to $42.3 million by 2049.
- US National Debt: The US national debt is expected to increase at a 5% CAGR from $37 trillion in 2025 to $119.3 trillion by 2049.
- Bitcoin Reserve Size: The reserve could consist of 1 million Bitcoin, which would represent an estimated 35% of the national debt by 2049.
Offsetting Liabilities with Bitcoin
The duo’s "optimistic" scenario assumes that the Bitcoin reserve would offset approximately $42 trillion of liabilities by 2049. This is a significant amount, considering the current value of the US national debt.
Challenges and Opportunities for Bitcoin Adoption
While the Lummis bill has not yet been reviewed by the Senate or House, President-elect Donald Trump’s incoming administration has floated the idea of a Bitcoin reserve, which has fueled a Bitcoin price rally to over six figures. The adoption of Bitcoin at the US state, institutional, and corporate level could further bolster its value and make it increasingly used as a currency.
Global Impact on Bitcoin Price
The potential for national-state members of the BRICS alliance (Brazil, Russia, India, China, and South Africa) to impact Bitcoin’s price and adoption is significant. According to Sigel, "It’s very possible that Bitcoin will be widely used as a settlement currency for global trade by countries who wanted to avoid the parabolic increase in USD sanctions that have been imposed."
Bitcoin Reserve Creation Options
The Lummis bill proposes several options for creating a Bitcoin reserve:
- Repurposing Seized Assets: The US could repurpose the 198,100 Bitcoin it holds from asset seizures.
- Financing through Emergency Support Functions: The remaining 801,900 Bitcoin could be financed through Emergency Support Functions.
- Selling Gold Reserves for Bitcoin: A portion of its $455 billion gold reserves could be sold to acquire Bitcoin.
These options would allow the US to create a Bitcoin reserve without money printing and taxpayer funds.
Conclusion
The creation of a 1 million Bitcoin reserve, as proposed by Senator Cynthia Lummis, has the potential to reduce the United States’ national debt by 35% in the next 24 years. While there are challenges and uncertainties surrounding Bitcoin adoption, the potential benefits make it an attractive option for governments and investors alike.
References
- VanEck’s report on Bitcoin reserve creation
- Senator Cynthia Lummis’ proposal for a Bitcoin reserve
- President-elect Donald Trump’s incoming administration’s idea of a Bitcoin reserve
