Bitcoin vs Bonds: A Ticking Time Bomb

Growing government spending and debt isn’t sustainable as investors are looking for alternatives to Treasury bonds for long-term store of wealth. Treasury Bonds will continue digging deeper as Bitcoin takes over.

Bitcoin addresses the problem of the devaluation of fiat currencies due to careless spending and borrowing. As government spending increases someone needs to buy up the Treasury bonds in order to enable this spending.

However, as of October 31st, 2021 the interest rate for the 10-year Treasury bond is 1.55% — lower than the Federal Reserve’s target inflation rate of 2% — making it a guaranteed loss for these investors.

As investors such as banks, hedge funds and foreign governments begin to slow down their purchases, a decrease in demand will drop U.S bond prices. As a result, the Fed will have to decide on whether to inflate the money supply or to allow higher interest rates.

Based off history and political pressure, it is almost guaranteed for the first option to occur — inflating the money supply — therefore decreasing the inflation-adjusted returns on treasury bonds, again incentivizing investors away from treasuries causing them to fall.𝘺𝘪𝘬𝘦𝘴