Bitcoin vs US Treasuries: Why BTC is better than VGLT, TLT, BND ETFs

on Oct 24, 2023
  • Bitcoin has done well in the past decade as it moved from less than $1 to $35,000.
  • It has survived some of the biggest headwinds in the crypto industry.
  • US government bonds have underperformed in the past few years.

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Bitcoin (BTC) price has done well this year, defying earlier predictions that it would collapse in a high interest rate environment. The coin has jumped by more than 100%, outperforming the Nasdaq 100, gold, and other assets.

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Most importantly, Bitcoin is beating government bonds. The 10-year yield jumped to 5% on Monday, the highest level since 2007. Similarly, the 30-year Treasury yield spiked to over 5.10%.

BTV vs Treasuries chart by TradingView

The case for Bitcoin

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Bitcoin price is still much lower than its all-time high of $67,000. However, despite this crash, the coin has emerged as one of the best-performing assets in the world. It has already surged by more than 35 million percent since its inception. 

There are several reasons why Bitcoin makes sense as an investment. First, BTC has been a survivor over the years. It thrived after the collapse of Mt.Gox in 2014. At the time, many bears believed that the coin would not survive.

Further, it has survived other black swan events like the collapse of Terra and FTX. These implosions alone led to over $50 billion in losses to investors. Additionally, Bitcoin survived the Covid-19 pandemic and is doing well in this period of high-interest rates.

A few years ago, it would be incomprehensible to imagine Bitcoin trading at $30,000 in a period of high rates. Rates have surged from zero, where they stayed after the Global Financial Crisis (GFC) to 5.50%, the highest point in more than two decades.

Therefore, these events mean that Bitcoin is not necessarily different from other assets like stocks and gold. For one, stocks also crashed when rates started rising in 2022 and are now attempting to bounce back.

There’s another case to make. For one, unlike government bonds, Bitcoin has a limited supply of 21 million coins. 19.5 million of these have already been mined while next year’s halving will make mining more difficult. Therefore, it makes sense to invest in a finite asset that has done well over the years.

Treasuries are at an elevated risk

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While Bitcoin price has soared, major Treasury ETFs have plunged in the past few years. The iShares 20+ Year Treasury ETF (TLT), Vanguard Long-Term Bond ETF (VGLT), and the Vanguard Total Bond Market Index Fund (BND) have crashed.

It is easy to understand why this is happening. America’s government has continued spending, pushing the total deficit to almost $2 trillion in the last financial year. Government debt has jumped to over $33.6 trillion.

At the same time, the cost to service this debt has jumped. The government spent over $800 billion in interest alone. There, the government can still afford to pay back this debt, but the burden will become too much.

For a long time, America was able to raise any amount of cash since countries like China, Saudi Arabia, Japan, and Switzerland were willing to buy. Now, many of these governments are dumping their holdings. The implication is that domestic buyers will need higher interest for the risk.

Worse, the US is facing a major double-whammy in the next few years. The total debt will soon cross the $50 trillion mark while social security will run out of funds by between 2030 and 2032. Defense spending will hit $1 trillion soon. 

Sadly, no party is willing to do the right thing to reduce spending and even balance the budget, meaning things will move from bad to worse.

Therefore, all these headwinds make it extremely risky for people to invest in VGLT and TLT ETFs. I suspect that the US will lose its final Triple-A rating in the next few years, which will make things worse. Therefore, it makes sense to invest in Bitcoin and even gold, which have a finite supply.

Bitcoin Terra Bond Market Crypto Government Bonds Trading Ideas