-
@ John B Mint
2025-03-20 19:00:46BitBonds
The idea, initially proposed by Newmarket Capital CEO Andrew Hohns at the Bitcoin Policy Institute’s “Bitcoin for America” conference, is that Congress could defease the federal debt and cut long-term interest rates by approving a new debt instrument collateralized with Bitcoin—BitBonds.
How It Works:
- For every $100 BitBond issued, $10 would buy Bitcoin for the U.S. Strategic Reserve.
- Bondholders would receive 1% annual interest (lower than traditional Treasuries) and 50% of BTC price appreciation.
A New Bitcoin Standard
At first glance, BitBonds is an innovative way to increase demand for U.S. Treasuries without Federal Reserve intervention while lowering borrowing costs. However, this instrument would signal a radical change in monetary policy.
A 4000-year precedent
Money (as a visual measure of credit) has been and is always socially constructed through a stable exchange ratio.
- Money didn’t appear in ancient Sumer until priests and palace administrators set rates between standard weights of grain and silver on palace-authorized cuneiform tablets.
- In Egypt, money was constructed through economic administrators (related to the king) setting common rates between an abstracted standardized 92 gram copper weight measurement called a Deben and grain.
- Roman and Greek mints fixed ratios and weights between precious metals to establish official coinage and stabilize their value.
- The U.S. established its first currency through a bi-metallic standard, fixing gold and silver rates via the U.S. Mint.
- The modern U.S. monetary system issues its currency on a promise to redeem $100 for $100 + 2% interest.
U.S. government debt became the default monetary exchange rate the moment Nixon suspended gold redemption in 1971. It was the only remaining promised ratio of exchange attached to the US Dollar. Each year, Congress votes to extend this debt-based system by approving the federal budget. And the Federal Reserve then manages the levers of bond prices and yields through open market operations. There is no other federal mechanism for securing universal interest in the dollar, than the interest paid from its debt.
With BitBonds collateralizing 10% of each issuance in Bitcoin, the government would effectively introduce a new promised ratio of exchange to US monetary policy. It would promise to redeem 10 cents of every $1 in this lending program for bitcoin (half for the reserve and half of its appreciated value for the holder). This promise would transition US monetary policy from a pure debt based system to a new implicit exchange rate between Bitcoin and the U.S. dollar.
How BitBonds Would Drive Bitcoin to $10 Million
- First, BitBonds promises unlimited buying pressure on a finite asset. (The government can perpetually issue more BitBonds to acquire Bitcoin.) That, combined with the fact that Treasuries are the world’s primary liquidity engine, would generate unprecedented demand for Bitcoin reserves.
- Second, unlike previous reserve assets like gold, Bitcoin’s indivisibility prevents fractional redemption. This network constraint prevents the government from redeeming less than 1 satoshi (the base unit of Bitcoin) for 10 cents, thereby setting a clear price target for the market. Promising to collateralize 10% of each bond with bitcoin is like priming the pump for max buy pressure, fixing a target price and pulling the trigger.
- Investors would front-run the Treasury’s buying spree with that target in mind and in a matter of time 1 satoshi will equal $0.10 ($10M per BTC).
- At $10M per BTC, Bitcoin’s total valuation would reach $210 trillion—a figure capable of servicing the $189 trillion in global U.S. debt obligations and backing the $21 trillion M2 money supply. This valuation would prime bitcoin to become the world reserve asset backing the world reserve currency (a digital dollar).
- After this transformation, the government would have the precedent to institute a more explicit system of regulating bitcoin and digital dollar redemption. You can learn more about what this system would look like in my thesis for why technocratic government agencies will inevitably use bitcoin to create a cashless digital society: The Anarchist’s Guide to Cashing out of the Matrix.
Why Market Resistance Will Fail
- Selling Bitcoin into a U.S. Treasury buy wall would be a losing trade. A continuous government buyer would absorb any attempt to suppress BTC’s price.
- Foreign governments would be compelled to adopt or lose financial leverage. If the U.S. redefines sovereign debt through Bitcoin, foreign central banks must accumulate Bitcoin or face economic devaluation.
- The Federal Reserve would have no choice but to accommodate Bitcoin-backed Treasuries. If BitBonds reshape U.S. debt issuance, the Fed must either integrate them into monetary policy or risk disrupting Treasury markets.
The short path to a $10 million bitcoin
- The U.S. Treasury launches BitBonds, requiring Bitcoin collateral equal to 10% of each issuance.
- Bitcoin markets recognize that the U.S. government is a continuous net buyer.
- Investors front-run this signal, accelerating Bitcoin accumulation.
- Institutional demand propels BTC to the $10M target, exponentially increasing the value of the SBR.
- Once 1 satoshi = $0.10, the federal government will have a stockpile of bitcoin valued at a cost basis greater than its annual debt obligations.
- Rather than use the stockpile to pay the debt down, the government will find that it needs to enforce a new surveillance-enforced bitcoin redemption policy to maintain a funnel of public bitcoin to the SBR in return for surveillable stablecoins. (read thesis for more)
Bitcoin’s Supply Guarantees a Stable Transition
Unlike gold, Bitcoin’s supply is fixed, transparent, and auditable. Once repricing begins, sovereign wealth funds, pension funds, and financial institutions will be forced to accumulate Bitcoin, play by the new state-issued redemption rules or be left behind.
I'm not sure how long it would take for the market to figure this out, but I’d assume it would be an all-out sprint to $10M BTC once the cat is out of the bag.