VanEck: 35% reduction of USA debt with Bitcoin

According to VanEck, the USA could achieve a 35% reduction in their national debt over the next 25 years thanks to the strategic reserve in Bitcoin.

To tell the truth, it is only a projection, and not a forecast, but the calculations that have been carried out are still interesting to analyze. 

The USA debt and the resolution with Bitcoin according to VanEck

The national debt of the USA in 2024 has risen above 36 trillion dollars. 

Note that a year ago it was about 34,000 billion, so in the last twelve months it has increased by about 6%.

Five years ago it was 23,000 billion, and ten years ago it was 18,000.

This means that from the end of 2014 to the end of 2019 it increased by about 28%, while from 2019 to today it has increased by as much as 56%.

It should be remembered, however, that the bulk of the increase occurred in 2020, when the Trump administration was forced to take extraordinary measures to combat the pandemic. 

In fact, in the last four years it has increased by 24%, while in the four years prior to 2020 it increased by 21%. 

These are nevertheless significant and continuous increases, based on a trend that shows no sign of reversing. 

There are many concerns regarding this trend, so much so that even the President of the Fed, Jerome Powell, recently stated that he considers it unsustainable in the long term. 

The reduction of debt 

Reducing that debt is so difficult that in fact no one succeeds. 

Practically, it has been growing continuously since 2001, and the reduction in 2000 was really extremely limited and of very short duration, so much so that it did not interrupt the growth trend that began many decades earlier. 

To tell the truth, inflation helps a bit to make it less unsustainable, because as prices increase, the State’s revenues from various taxes and duties also increase. 

Note that ten years ago inflation was very low, 0.8%, and until two years ago it had remained practically always below 2%, except on relatively rare occasions. 

Instead, in 2022 it skyrocketed above 9%, then dropped to 3.4% at the end of 2023 and to 2.7% in November 2024. 

Therefore, the increase in the real value of the USA debt in the last two years has been less compared to that of the previous years, despite the increase in the nominal value being greater. 

Now, however, with inflation returning towards 2%, debt sustainability is becoming more challenging, especially if it continues to increase at this pace. 

The role of Bitcoin

The reasoning of VanEck starts from the proposal by Senator Cynthia Lummis to have the USA hold 1 million Bitcoin.

It should be noted, however, that as of today there is absolutely no certainty that such a proposal will be approved by Congress. 

In reality, the hypothesis that President Trump might eventually establish a strategic reserve in Bitcoin, once he takes office on January 20, seems quite likely, but what Trump has actually promised is just the idea of not selling the approximately 200,000 BTC already held by the US government thanks to seizures and confiscations carried out in the past from various criminals. 

Instead, VanEck’s projection is based on the Lummis proposal, which, to be honest, seems a bit unlikely to be approved. 

On the other hand, VanEck’s hypothesis is just a projection, and not a true forecast. 

VanEck’s calculations: Bitcoin is capable of reducing the USA debt

According to the head of digital asset research at VanEck, Matthew Sigel, and analyst Nathan Frankovitz in a report published a few days ago, a reserve of one million BTC could allow the United States to reduce its national debt by 35% if the price of Bitcoin were to exceed 42 million dollars by 2049.

Imagining that in 2049 the price of Bitcoin rises to 42 million dollars is actually a clear gamble, but it is interesting how the analysts at VanEck arrived at that figure. 

In the report, at a certain point, a chart appears. 

This is a projection of the growth of US debt compared to Bitcoin reserves based on the assumption of a 25% CAGR of BTC. 

The CAGR (Compounded Average Growth Rate) is the compounded annual growth rate, and in this case regarding the price of BTC, it is set at 25%.

The point is precisely this: why 25%?

The growth of Bitcoin

If we take as a reference the first available price for Bitcoin on public markets, namely the $0.06 of 2010, the CAGR up to today would be much higher than 25%.

Instead, if we take as references the historical highs from 2017 onwards, that is, since the price of Bitcoin exceeded $10,000 for the first time, the CAGR turns out to be actually 25%. 

From the comparison between these two calculations, however, it emerges that, in reality, the CAGR is declining, so much so that taking the 2013 peak as a reference, this percentage rises to 50%, while taking the 2021 peaks as a reference, it drops to 15%. 

So not only does a CAGR of 25% from here until 2049 seem unlikely, but it also seems quite likely that over the next few decades this percentage will continue to decrease. 

For example, if the CAGR of BTC were to decrease by 40% every four years, its price in 2049 would be $250,000. 

This means that depending on how the projection is made, enormously different results are obtained.