Rising anxiety over global government borrowing is bringing attention back to Bitcoin’s potential as a mispriced asset. Bitwise, a crypto-focused investment firm, has highlighted how growing sovereign debt pressures could reinforce the narrative that Bitcoin is undervalued relative to macroeconomic risks.
The OECD projects that both public and private borrowers will need to raise roughly $29 trillion in 2026. This figure represents a substantial increase from 2024 levels and is nearly double the amount borrowed ten years earlier. A significant portion of this borrowing—around 78%—is expected to be used for refinancing existing obligations rather than new expenditures. If bond yields remain elevated, this refinancing burden could intensify worries about the sustainability of government balance sheets, according to Bitwise.
In this environment, Bitcoin could become more appealing to investors seeking assets that are not tied to government credit systems. Bitwise does not offer a direct price prediction but suggests that the macroeconomic backdrop may strengthen Bitcoin’s role as a hedge.
Japan is a notable case study in the report. The country’s public debt stands at almost 230% of its GDP, one of the highest among advanced economies. Recently, Japan’s 10-year government bond yield rose to 2.78%, while its 30-year yield hit a record high. As of the report, the 10-year yield was 2.66%. Japanese investors hold about $1.2 trillion in US Treasuries. With higher domestic yields, foreign bonds become less attractive after accounting for currency hedging costs. For instance, yen-hedged 10-year US Treasuries yield only 2.19%, compared to Japan’s 2.66%, which could prompt Japanese capital to shift back home.
Pressure is also visible in the US market. US 30-year Treasury yields reached 5.11% on May 11, the highest since 2007. Additionally, sovereign risk premiums, as measured by 10-year swap spreads, have climbed to levels not seen since the European debt crisis of 2011-2012. While tighter financial conditions may hurt Bitcoin in the short term, a major bond market disruption could force central banks to inject liquidity. If investors anticipate a return of fiat liquidity, Bitcoin could benefit.
Bitwise references a model by investor Greg Foss that values Bitcoin at approximately $224,000 based on sovereign default risk, assuming broader adoption as a hedge against government credit risk. This is a theoretical figure, not a formal target. The report also notes that Bitcoin’s price performance is linked to real interest rates. During the 2021 bull market, real rates fell, supporting Bitcoin; in 2022, rising real rates due to Fed tightening coincided with a bear market.
Separately, Bitcoin researcher Sminston has predicted that Bitcoin could trade between $90,000 and $255,000 by the end of 2026, based on a logarithmic model known as the Bitcoin Decay Channel that tracks historical cycle extremes.