By Brett Munster
The name is Bond, BitBond
With the U.S. federal government increasingly embracing the crypto industry, a new wave of financial innovation is finally beginning to take shape. Among the more intriguing ideas surfacing from this shift is the concept of government-issued bonds backed—at least partially—by bitcoin. Enter “BitBonds,” a hybrid financial instrument that merges traditional Treasury securities with crypto exposure. What would have once been considered a fringe concept, BitBonds are gaining momentum and could mark the beginning of a new era in sovereign finance—one where bitcoin plays a central, stabilizing role in the global monetary system.
At their core, BitBonds are designed to boost demand for U.S. Treasury debt by offering investors a taste of bitcoin’s upside, without abandoning the safety of sovereign bonds. One proposed structure envisions 90% of the bond’s proceeds going toward standard government funding, while the remaining 10% is used to purchase and hold bitcoin. The bond would have a ten-year maturity, with the buyers of the bonds receiving full exposure to bitcoin’s annual appreciation up to 4.5%, and then half of any gains beyond that. The other half of those gains above 4.5% would go to the government. If bitcoin doesn’t rise, the bond still repays principal with a modest coupon. But if bitcoin surges—which has historically been the case over any ten-year time frame—investors get to enjoy a portion of that rally on top of their baseline yield.
In essence, BitBonds offer the stability of traditional government debt with a built-in “bitcoin kicker.” For conservative investors, that means downside protection with the potential for equity-like upside—all in a familiar fixed income wrapper. Crucially, many institutional and fixed income investors are restricted by mandates or risk tolerance from holding bitcoin directly or even through a spot ETF. BitBonds could serve as a workaround, providing indirect exposure to bitcoin’s upside without breaching compliance lines. Even if bitcoin goes nowhere, investors still receive their principal back plus a modest yield. But if bitcoin rallies, they gain access to an asset class that’s typically out of reach – one that can deliver a much-needed boost in returns to help protect their investment against inflation. From a portfolio construction standpoint, it’s a rare hybrid: capital preservation paired with asymmetric growth potential.
For the U.S. government, the benefits are numerous. The most immediate is lower borrowing costs. With the Federal Reserve maintaining elevated interest rates, refinancing existing debt has become increasingly costly—just as the government must roll over $7 trillion in maturing debt and finance more than $2 trillion in new deficit spending this year. By sweetening the pot with bitcoin exposure, BitBonds could allow the Treasury to issue debt at significantly lower interest rates. If, for example, the government refinanced just $2 trillion in debt at 1% instead of the market’s 4.5%, it could save roughly $700 billion over a decade—enough to fund infrastructure, lower the deficit, or, dare we say, fix potholes faster than Congress can debate them.
And that’s before factoring in any gains from bitcoin itself. Even if bitcoin stagnates, the government still benefits from issuing lower-yielding debt. But if bitcoin appreciates—as it has done dramatically in past market cycles—the government’s retained share could become a significant asset. That appreciation wouldn’t just sit on a balance sheet; it could be used to directly offset national debt, fund new programs, or even lower taxes.
There’s also the issue of demand—or more accurately, the recent lack of it. Treasury markets have shown signs of strain, with the 10-year yield spiking from 4.01% to 4.58% in a single week amid softening demand. BitBonds could reverse that trend, tapping into a broader pool of investors—especially those eager for crypto-linked returns but unwilling to embrace the volatility of owning bitcoin outright.
MicroStrategy offers a compelling precedent. The company has raised billions by issuing 0% interest convertible notes to fund its bitcoin purchases—notes that have been consistently oversubscribed. Investors aren’t betting on MicroStrategy’s cash flows; they’re buying into bitcoin’s upside. Despite offering no yield, these bonds ended up being the best performing in the market last year, driven purely by their bitcoin exposure. If there’s that much appetite for a corporate-issued crypto-linked bond, imagine the demand for a similar instrument backed by the full faith and credit of the U.S. government.
Critics who dismiss BitBonds as a risky gimmick are not only missing the point—they’re fundamentally misunderstanding both the mechanics of the instrument and the reality driving its emergence. This isn’t a reckless moonshot; it’s a calculated, asymmetric bet with very little downside for the government. Even if bitcoin underperforms, the reduced interest burden alone justifies the structure. That’s not speculation—it’s smart, strategic financing.
And that’s just the beginning because the real magic happens at scale. With deficits exceeding $2 trillion annually, issuing BitBonds to fill even a portion of that gap could translate into hundreds of billions in interest savings. If bitcoin performs well, the upside isn’t just a cherry on top—it’s a potential macroeconomic game-changer. Treasury could amass capital surpluses without raising taxes or slashing spending, making it an elegant way to reconcile fiscal responsibility with financial innovation. If enough capital flows into these BitBonds well below market interest rates, it could create powerful ripple effects across the broader debt market—potentially lowering borrowing costs for everything from mortgages and auto loans to small business financing.
In a world where trust in fiat is slowly eroding and enthusiasm for U.S. Treasuries is cooling, BitBonds offer something novel: a way to restore confidence in government debt while aligning with one of the fastest-growing asset classes in history. They’re not a panacea—but if designed thoughtfully, they could be a breakthrough. With limited downside, significant potential upside, and growing investor appetite, they could become one of the most effective tools the U.S. government has for sustainably managing its debt.
Despite the Price Dip in Q1, Fundamentals are Growing
Back in March, we took a closer look at the turbulent start to the year for the crypto market. At the time, we suggested that February’s downturn wasn’t driven by weaknesses in the fundamentals of crypto itself, but rather by broader macroeconomic uncertainty. That perspective has held up well. While price performance in the first quarter was underwhelming, a closer analysis reveals a different story: the underlying foundations of the crypto ecosystem are becoming significantly stronger.
Supporting that view is Bitwise Invest’s recently released Q1 2025 report. As the firm behind one of the largest Bitcoin ETFs, Bitwise provides a detailed, data-rich perspective—spanning 72 pages of charts, commentary, and analysis. For those who enjoy diving into the numbers, it’s a must read. (Though let’s be honest—it’s possible I’m the only one who gets this excited about 72 pages of crypto data.) But if you’re a normal person just looking for the bottom line, here it is: while crypto prices remain below their all-time highs, the industry’s growth and adoption are hitting new records across the board.
Let’s start with stablecoins—those dollar-pegged digital assets that have quietly become one of the most widely used applications of blockchain technology. Longtime readers will know we’ve covered stablecoins frequently, and with good reason: they’ve evolved far beyond their original role as tools for crypto traders and are now driving real-world utility at scale. In Q1, stablecoin supply reached a record high of over $218 billion, a 13.5% increase from the previous quarter. Even more striking, transaction volume jumped more than 30%. To put that in perspective: in 2024, stablecoins processed more volume than Visa.
Source: Bitwise Invest “Crypto Market Review Q1 2025”
Tokenization—the process of turning real-world assets like government bonds or real estate into blockchain-based digital tokens—also had a breakout quarter. The market for tokenized assets grew by an impressive 37%, reaching a new all-time high of $19 billion. This isn’t just crypto dabbling in fringe experiments anymore; it’s the early stages of a broader transformation—one where traditional finance and blockchain technology are beginning to converge in meaningful, lasting ways.
Source: Bitwise Invest “Crypto Market Review Q1 2025”
On the institutional front, the signals of growing adoption were hard to ignore. Bitcoin futures trading volume topped $800 billion in Q1, while open interest—the total value of outstanding futures contracts—reached a record $16 billion. These instruments are typically the domain of professional investors and financial institutions, so seeing them hit all-time highs indicates that institutions aren’t just testing the waters—they’re entering the space with conviction. Further underscoring this trend, the amount of bitcoin held by publicly traded companies rose to a new high of 688,000 BTC, reinforcing the view that large entities increasingly see crypto as a long-term strategic asset.
Source: Bitwise Invest “Crypto Market Review Q1 2025”
And we can’t overlook Ethereum—the backbone of decentralized applications and smart contracts. Layer 2 (L2) scaling solutions, built to make Ethereum faster and more cost-effective, have seen explosive growth. In Q1 alone, over 1.2 billion transactions were processed across L2 networks. Leading the way was Coinbase’s Base network, which has quickly become the standout network in this space. It’s clear that activity across the Ethereum ecosystem isn’t just increasing—it’s accelerating at a remarkable pace.
Source: Bitwise Invest “Crypto Market Review Q1 2025”
To recap: Q1 2025 saw record highs in stablecoin assets under management, tokenized real-world assets, bitcoin futures trading and open interest, public company bitcoin holdings, and Ethereum Layer 2 transactions. That’s a long list of milestones for a quarter when crypto prices were supposedly “crashing.”
The reason I consistently highlight fundamental growth and adoption metrics in this newsletter is simple: in a developing asset class like crypto, price alone rarely tells the full story. When adoption, usage, and institutional involvement are hitting new highs even as prices pull back, it’s often a sign that meaningful progress is happening behind the scenes. Historically, these kinds of moments have laid the foundation for the next wave of innovation—and, yes, price appreciation. So while your portfolio may not be reflecting it just yet, the underlying infrastructure is being built for what could be the next major bull run.
In Other News
Bitcoin supply on crypto exchanges hits 5-year low and that’s a good sign.
Binance, the world’s largest crypto exchange, has been advising numerous countries and sovereign wealth funds on establishing a strategic bitcoin reserve.
Standard Chartered says bitcoin is likely to keep rising amid Fed independence risks.
Cantor Fitzgerald spearheads $3B move into bitcoin with Tether, SoftBank, and Bitfinex.
Bitcoin surpasses Google’s market cap.
Sovereign wealth funds are piling into bitcoin according to Coinbase.
Senator McCormick invests more in bitcoin as legislation is in the works.
Ark Invest outlines $2.4 million bitcoin bull case.
Federal Reserve retracts guidance that had discouraged banks from engaging in crypto.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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