As Bitcoin and cryptocurrency take center stage in the 2024 Presidential elections, Trump’s statement of creating a Bitcoin Reserve has given hope for a solution to the current economic crisis. With fears of recession and inflation looming over the US along with the rest of the world, another issue of indebtedness has started to grapple the nation. According to the fiscal data provided by the US Department of Treasury, the national debt of $35.09 trillion is the total amount of borrowing by the U.S. Federal Government accumulated over the nation’s history. This figure, thus, includes the debt held by the public and debt held by federal trust funds and other government accounts.
Strategists have been contemplating what could be the US Treasury’s course of action as it tussles with the criticism of issuing a lot of short-dated debt- what has been infamously termed as ‘Activist Treasury Issuance.’ In a Bloomberg podcast, Amar Reganti, a fixed-income strategist at Wellington Management and Hartford Fund, points out that the Treasury’s general strategy of issuing a ‘funding mix’ could be a part of its action to address the indebtedness.
Reganti predicts that the treasury can sell 30-year Treasuries, 10-year Treasuries, or even a lot of three-month T-bills. But a kind of funding mix in every quarter is to come.
Amidst the prophecies of ‘traditional’ financial strategists concerning the indebtedness, Bitcoin does not find a mention in the passing. This is the case even as MicroStrategy’s Bitcoin treasury reserves have turned out to be successful. In fact, this move has become one of the reasons why $MSTR has outperformed 499 of 500 stocks in the S&P 500 recently .
How the US treasury can learn from MicroStrategy’s Bitcoin Treasury Plan:
The US Treasury offers five types of Treasury marketable securities, i.e., Treasury Bills, Treasury Notes, Treasury Bonds, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs).
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If the US treasury attempts to take a page from MicroStrategy’s playbook and includes Bitcoin in its reserve assets, this could prove to be a viable step towards diversification benefits and serve as a hedge against inflation or currency devaluation (just like banks investing in gold or foreign currencies).
MicroStrategy takes into consideration Bitcoin’s crash-and-surge, and uses it as a long-term asset in its strategy. The U.S. Treasury could consider how diversified asset portfolios, including digital assets, might improve resilience and risk management. Following its traditional strategy of funding mix, even Bitcoin assets could be one of its sell-able assets.
Similar to MicroStrategy using Bitcoin to secure loans and raise capital, the U.S. treasury can also follow this methodology. The Treasury can use Bitcoin as collateral for financing or liquidity management. Even with volatility and regulatory issues, doing so might be a win-win for the crypto community as well as traditional investors.
Thus, the U.S. Treasury can experiment with how integrating and including Bitcoin could influence investor sentiment and market perception. This might also attract new types of modern investors, especially those who see through the political motives of federal government bodies and miss the opportunity to enter traditional economies.
Thus, MicroStrategy’s approach to using Bitcoin as a core component of its treasury management strategy can offer several lessons and potential insights for the U.S. Treasury attempting to fund its debt.
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