A monthly research report from Bitwise’s European arm published this week pegs bitcoin’s theoretical “fair value” at around $224,000 if the asset was widely adopted as portfolio insurance against G20 sovereign debt defaults.
The research team described the figure as a “model-implied illustrative figure, not a price target or forecast,” however.
The figure stems from a theoretical framework first proposed by analyst Greg Foss in 2021 that treats bitcoin as a credit default swap on government bonds.
Because the bitcoin network has no central issuer and operates without a sovereign backstop, the Foss model frames it as an uncorrelated hedge against the possibility of major government defaults.
The implied fair value of $224,000 depends on the weighted probability of default across a group of 20 (G20) states and the market value of the bonds notional insured.
It built the case around stress on the government bond markets. Japanese 30-year government bond yields have hit record highs, while 10-year JGB yields are at multi-decade highs.
The International Monetary Fund and OECD have warned that governments and companies are set to borrow $29 trillion from bond markets this year, 17% higher than in 2024, with the IMF describing markets as less forgiving and investors increasingly questioning the limits of government borrowing capacity.
Bitwise singled out Japan’s JGB market as particularly vulnerable, citing its roughly $7.5 trillion size as the world’s second-largest government bond market, Japanese investors’ roughly $1.2 trillion in US Treasuries, and Japan’s roughly 230% debt-to-GDP ratio.
It noted that 10-year swap spreads, which measure sovereign risk premiums, are at their highest level since the 2011-2012 European debt crisis across major government bonds.
But the report also highlighted some short-term headwinds for bitcoin.
Higher global bond yields have made Strategy’s ( MSTR ) STRC perpetual preferred stock dividend less attractive to investors, and STRC has recently traded below par.
Strategy purchases have accounted for about two-thirds of institutional bitcoin demand via global financial firms and bitcoin ETPs through 2026 to date, according to Bitwise’s count, meaning a stall in the Strategy’s STRC-funded accumulation could significantly hamper the flow.
The upside scenarios that Bitwise outlines depend on monetary policy and sovereign stress.
A Fed pause under newly confirmed chairman Kevin Warsh against rising inflation could push real interest rates lower, which the report cited as a historic tailwind for bitcoin. A sovereign bond capitulation, forcing central bank intervention to ensure financial stability, could validate bitcoin’s role as a decentralized hedge against sovereign counterparty risk.
In terms of valuation, the report marked one of the most extreme differences between bitcoin and US big-cap technology it has observed. Bitcoin’s market cap-to-realized value ratio is in the bottom half of its historical distribution, with only 36% of historical readings below current levels.
In contrast, the NASDAQ 100’s price-to-book ratio is at an all-time high, with 99% of historical readings below current levels.
Bitcoin traded near $66,300 on Wednesday after falling from above $71,000 earlier in the week.
