What Would BTC’s Price Need to Be for the U.S. to Use It to Address National Debt?

In a bold vision for integrating Bitcoin into national financial strategies, President-elect Donald Trump declared at a Bitcoin conference in July that he would establish a “Bitcoin national stockpile.” He emphasized his ambition for the U.S. to become “the crypto capital of the planet and the Bitcoin superpower of the world.”

Building on this momentum, Bitcoin advocate Senator Cynthia Lummis introduced the Bitcoin Act in July 2024. The legislation proposes creating a decentralized network of secure Bitcoin vaults managed by the U.S. Department of the Treasury, forming a strategic Bitcoin reserve. The plan aims to acquire up to 200,000 BTC annually over five years, accumulating a total of 1 million BTC—or roughly 5% of Bitcoin’s total supply. To finance this initiative, Lummis suggested reallocating existing assets, such as selling portions of the Federal Reserve’s gold reserves, rather than issuing new debt or printing dollars.This raises a fascinating question: What would Bitcoin’s price need to be for such a strategic reserve to make a meaningful impact on the U.S. national debt? Let’s explore two scenarios.

Goal

Reduce the national debt-to-GDP ratio to a manageable 50%.

Bitcoin Price = US National Debt Reduction / Total Bitcoin in US Government Reserve

Understanding the Context

• Debt-to-GDP Ratio: This ratio indicates economic health. While some debt is beneficial, the U.S. debt-to-GDP ratio climbed from below 40% in 1980 to 123% in 2024, meaning the nation now carries more debt than its annual economic output.
• GDP Growth: Historically, U.S. GDP has mostly grown year over year, and it is projected to reach $27.96 trillion by the end of 2024. For calculation purposes, let’s assume the GDP growth is around 2%.

What does US Debt to GDP ratio look like over time? It various from below 40% in 1980 to 2024’s 123%. We have more debt than our annual gross.

Source: US Treasury

Scenario 1: By End of Trump’s Term in 2028

Assumptions:

• GDP Growth Rate: 2% annually.
• Debt Growth: No additional debt is accrued.
• Bitcoin Reserve: The U.S. accumulates 1,000,000 BTC as planned.

Calculations: Bitcoin Price = US National Debt Reduction / Total Bitcoin in US Government Reserve

1. Projected GDP of 2024: $28.82 trillion.
2. Projected GDP by 2028: $28.82 trillion * 1.02^{^4} = $31.20 trillion.
3. Target Debt Level (50% of GDP): $31.20 trillion * 0.5 = $15.60 trillion.
4. Current Debt Level (2024): $35.46 trillion.
5. Debt Reduction Needed: $35.46 trillion – $15.60 trillion = $19.86 trillion.
6. BTC Price Needed: $19.86 trillion ÷ 1,000,000 BTC ≈ $19.86 million per BTC.

This price target is extraordinarily high, far exceeding MicroStrategy Chairman Michael Saylor’s prediction of Bitcoin reaching $13 million by 2045 with an annual return of 29%.

Scenario 2: By 2044 (20 Years Horizon)

Assumptions:

• GDP Growth Rate: 2% annually.
• Debt Growth: No new debt added.
• Bitcoin Reserve: Fixed at 1,000,000 BTC.

Calculations:

1. Projected GDP of 2024: $28.82 trillion.
2. Projected GDP by 2044: $28.82 trillion * 1.02^{^20} = $47.28 trillion.
3. Target Debt Level (50% of GDP): $47.28 trillion * 0.5 = $23.64 trillion.
4. Current Debt Level (2024): $35.46 trillion.
5. Debt Reduction Needed: $35.46 trillion – $23.64 trillion = $11.82 trillion.
6. BTC Price Needed: $11.82 trillion ÷ 1,000,000 BTC ≈ $11.82 million per BTC.

This is still a staggering figure but more plausible within the long-term context of Bitcoin’s historical growth trajectory.

How do you think? Is Bitcoin price going to be over a million dollars in long term? Will the Bitcoin Strategic Reserve help reduce the US national debt?