A recent report by Bitwise has brought the discussion of Bitcoin valuations back to sovereign debt risks. The firm believes that rising refinancing needs from global governments and corporations could increase pressure on bond markets, and investors will pay more attention to assets outside the government credit system.
Borrowing volume to reach $29 trillion by 2026
According to data from the OECD cited by Bitwise, government and corporate borrowing is projected to reach approximately $29 trillion in 2026, 17% higher than in 2024 and nearly double that of a decade ago.
The report states that approximately 78% of new borrowing by OECD governments will be used to refinance existing debt rather than for new spending. Bitwise believes that if yields remain high, this refinancing pressure could further amplify market concerns about sovereign balance sheets.
In this context, Bitcoin may be more readily viewed by some investors as an alternative to the government credit system. Bitwise does not present this assessment as a direct price prediction, but believes that the macroeconomic environment is reinforcing Bitcoin's hedging narrative.
Japanese bond market becomes a key focus of observation.
The report cites Japan as a key case study. Bitwise states that Japan's public debt is close to 230% of its GDP, a high level among major economies. Regarding yields, the yield on Japanese 10-year government bonds rose to 2.78% at one point, while the 30-year yield hit a record high.
By Tuesday, the 10-year Japanese government bond yield was around 2.66%. Bitwise also noted that Japanese investors hold approximately $1.2 trillion in U.S. Treasury bonds. As domestic yields rise in Japan, the attractiveness of overseas bonds is declining when currency hedging costs are factored in.
- The yield on 10-year Japanese government bonds is approximately 2.66%.
- The hedged 10-year US Treasury yield is approximately 2.19%.
- Japanese investors hold approximately $1.2 trillion in U.S. Treasury bonds.
The report argues that this change in interest rate spreads may prompt some Japanese funds to flow back to the domestic bond market, making Japan an important sample for observing global bond market pressures.
The theoretical model points to $224,000
Bitwise stated that bond market pressures are not limited to Japan. The yield on the 30-year U.S. Treasury note rose to 5.11% on May 11, its highest level since 2007. The firm noted that tighter financial conditions could suppress Bitcoin's performance in the short term, but if the bond market experiences more significant disruptions, central banks may be forced to provide liquidity again.
The report cites investor Greg Foss's sovereign default risk model, stating that if Bitcoin were more widely used as a hedge against government credit risk, its theoretical fair value could approach $224,000. Bitwise emphasizes that this figure is a theoretical valuation and not a formal target price.
The report also states that Bitcoin's future price movement depends in part on changes in real interest rates. Bitwise defines the real interest rate as the federal funds rate minus US CPI inflation. Furthermore, according to Bitcoin researcher Sminston's assessment based on a logarithmic model, BTC could be in the range of $90,000 to $255,000 by the end of 2026.
