Bitcoin Could Be Worth Over $200,000 As ‘Portfolio Insurance’ Against Sovereign Default: Report

According to a hadith a report According to crypto asset manager Bitwise, Bitcoin (BTC) is well-positioned to act as “portfolio insurance” against sovereign default risk. The report comes at a time when global debt-to-GDP levels are breaching new highs, raising concerns about a potential global debt crisis.

Bitcoin: A Solution to Global Debt Defaults?

The report highlights Bitcoin as an “interesting alternative” for investors seeking to preserve their wealth during scenarios such as a sovereign default or hyperinflation. It states:

In a theoretical model, Bitcoin could act as “portfolio insurance” against default on a basket of major sovereign bonds that have a current “fair value” of about $219,000 based on this model.

To provide context, global public debt levels are steadily rising. Recently, the US public debt exceeded $36 trillion, equivalent to 123% of the country’s gross domestic product. Even more worrying is the accelerating pace of debt growth since September 2024, reaching $917 billion in just a short period.

This growing financial debt is not limited to the United States. Other major economies, such as France and the United Kingdom, are seeing unprecedented increases in public debt, which is ringing alarm bells for bond investors.

Bitwise report says Bitcoin is compelling substitute To gold in such scenarios. He highlights that Bitcoin’s decentralized network structure makes it essentially a “trustless system,” distinguishing it from sovereign bond contracts, which depend on the issuer’s ability to repay its debts.

The report also notes that the weighted average probability of default for G20 countries over the next decade currently stands at 6.2%. By comparison, the average probability of default in the United States is about 4.5%. The report indicates:

Based on this model, this means that the fair value of Bitcoin is already around $219,000 per Bitcoin. In the unlikely event that all G20 sovereign bonds default simultaneously, the theoretical “fair value” of 1 Bitcoin under this model would rise to about $3.5 million.

However, the report stresses that major economies are unlikely to default in the short term. However, the above model gives insight into where Bitcoin’s price might rise if such a scenario occurs.

Bitcoin holds steady amid total uncertainty

Since the coronavirus crash in March 2020, Bitcoin has remained largely resilient, despite facing significant macro headwinds over the past five years. For example, the price of Bitcoin Shown Flexibility was strengthened after the US Federal Reserve announced its intention to slow down interest rate cuts in 2025.

Likewise, the return Bitcoin’s “kimchi premium” during the political crisis in South Korea in December highlighted investors’ preference for Bitcoin as an asset for preserving wealth in times of uncertainty. At press time, Bitcoin is trading at $105,761, up 1.2% over the past 24 hours.

Featured image from Unsplash.com, charts from Bitwise and TradingView.com