Debt Crisis Worries Renew Focus on Bitcoin’s Undervalued Potential

Bitwise has put forward a new valuation perspective for Bitcoin, arguing that the rising pressures of increasing sovereign debt may reinforce BTC’s role as a macro hedge, especially in challenging bond markets.

In a recent report, Bitwise claimed that rising investor concerns surrounding government debt could spotlight Bitcoin’s potential undervaluation. The asset management firm tied this narrative to the increasing pressures facing global bond markets, where governmental and corporate borrowing schedules are expected to rise drastically in 2026.

Bitwise Links Bitcoin’s Case to Debt Pressures

Bitwise notes that the OECD foresees public and corporate borrowing to amount to about $29 trillion by 2026, marking a 17% increase from 2024 and nearly double the levels seen a decade ago.

Additionally, the report highlights that approximately 78% of OECD governments’ borrowing will be aimed at refinancing existing debt, not new spending. Bitwise argues that this refinancing pressure could exacerbate investor unease about sovereign balance sheets, particularly if bond yields remain high.

In this context, Bitwise suggests that Bitcoin may attract greater interest from investors looking for assets that exist outside of governmental credit systems. While the firm did not provide an explicit price forecast, it maintained that the macroeconomic landscape could enhance Bitcoin’s attractiveness as a hedge.

Japan: A Key Indicator in the Bond Market

Japan was specifically highlighted in the Bitwise report due to its high debt levels and rising bond yields. The report pointed out that Japan’s public debt has escalated to nearly 230% of GDP, positioning it among the highest of major economies.

Bitwise noted that Japan’s 10-year government bond yield recently climbed to 2.78%, with the 30-year yield reaching an all-time high. As of Tuesday, the 10-year yield was recorded at 2.66%.

Moreover, Japanese investors hold about $1.2 trillion in US Treasurys, with the report indicating that increasing domestic yields now make foreign bonds less attractive when accounting for currency hedging costs.

By comparing Japan’s 10-year yield of 2.66% with a 2.19% yield on yen-hedged 10-year US Treasurys, the report suggested that this yield gap might motivate Japanese capital to return to domestic bonds.

US Yields Heightening Concerns Over Sovereign Risks

The report underscores that these pressures extend beyond Japan. Bitwise indicated that US 30-year Treasury yields hit 5.11% on May 11, marking the highest since 2007.

Additionally, Bitwise pointed out that sovereign risk premiums, as assessed by 10-year swap spreads, have surged to their highest level since the European debt crisis in 2011 and 2012.

While the firm cautioned that tighter financial conditions may negatively affect Bitcoin in the short term, it also noted that a significant disruption in the bond market could lead central banks to inject liquidity. In such a case, Bitcoin could benefit if investors foresee a revival of fiat liquidity.

Bitcoin’s Theoretical Fair Value Estimated at $224,000

Bitwise referenced investor Greg Foss’s sovereign default risk model, indicating that if Bitcoin achieves widespread recognition as a hedge against governmental credit risks, its value could approach $224,000. The firm stressed that this figure is theoretical and not a specified price target.

The report further mentioned that Bitcoin’s future trajectory will depend partly on real interest rates—defined as the Fed Funds rate minus US CPI inflation. Bitwise observed that Bitcoin thrived during the 2021 bull market when real rates were declining, while the 2022 bear market corresponded with rising real rates amid aggressive monetary tightening by the Federal Reserve.

In a separate analysis, Bitcoin researcher Sminston suggested that BTC could trade within a range of $90,000 to $255,000 by the end of 2026, based on the Bitcoin Decay Channel, a logarithmic model that tracks historical cycle peaks and troughs.