Bitcoin vs. sovereign bonds: Why are some investors making the shift?

Why are immoderate investors choosing Bitcoin implicit authorities bonds?

Historically, sovereign bonds similar the US Treasurys, Japanese authorities bonds and German Bunds person been go-to assets for risk-averse investors. They are usually perceived to beryllium minimal-risk assets offering dependable returns. However, since the emergence of Bitcoin 13 years ago, the communicative of Bitcoin arsenic an alternative to bonds has been gradually increasing successful the minds of investors.

The interplay betwixt the Federal Reserve’s equilibrium expanse and the M1 and M2 wealth proviso is besides a important information to assistance recognize wherefore immoderate investors are shifting to Bitcoin (BTC). 

• The M1 wealth proviso is simply a measurement of the full magnitude of wealth readily disposable successful an economy. It includes the astir liquid assets: cash, request deposits (checking accounts) and different akin checkable deposits.
• The M2 wealth supply is simply a wider measurement of wealth proviso than M1. It includes each of the M1 assets, combined with savings deposits, retail wealth marketplace funds (MMFs) and small-time deposits.

The US Federal Reserve’s actions connected expanding and shrinking its $6.69-trillion equilibrium expanse straight power the M1 and M2 supply, which successful crook impact inflation, enslaved yields and capitalist assurance successful fiat assets. When the Fed adds oregon removes money, it changes however overmuch currency (M1) and savings (M2) are available. These changes impact inflation, however overmuch involvement bonds wage and however overmuch radical spot accepted (fiat) money.

In the past fewer years, the Fed has kept the national funds complaint successful a precocious scope betwixt 4% and 5% and has besides signaled that rate cuts mightiness not beryllium needfully imminent. On May 26, 2025, Moody’s downgraded the US indebtedness standing from AAA to AA1, citing fiscal instability and governmental dysfunction.

Additionally, the Japanese enslaved crisis of 2024-2025 exemplified however a displacement successful the narration betwixt enslaved request and yields, amplified by US tariff policies, tin interaction capitalist sentiment and the harmless haven presumption of authorities debt. In this macroeconomic scenario, Bitcoin is progressively cementing its presumption arsenic a hedge against inflation. 

As of June 13, BTC has outperformed the S&P 500, golden and the Nasdaq 100 by posting 375.5% gains implicit a three-year period, arsenic compared to 59.4%, 85.3% and 86.17%, respectively.

Did you know? The Bitcoin Core developers person decided to summation the OP_RETURN information transaction bounds from 80 bytes to 4 megabytes, arsenic confirmed successful an update connected GitHub. Although this update to the codification done the Bitcoin Core 30 merchandise has sparked a statement wrong the community, it is aimed astatine addressing concerns with information retention techniques and improving the unspent transaction output (UTXO) set. This merchandise is scheduled to spell unrecorded successful October 2025.

The emergence of Bitcoin’s prominence successful the modern investor’s portfolio

The US Securities and Exchange Commission’s approval of the spot Bitcoin exchange-traded funds (ETFs) connected Jan. 10, 2024, was a watershed infinitesimal for Bitcoin’s relation successful the portfolio of modern investors, some accepted and retail. The 12 Bitcoin spot ETFs trading successful the US person full assets nether absorption (AUM) of $132.5 cardinal arsenic of June 11, 2025, per data from Bitbo. It’s a monumental fig considering these ETFs person lone been trading for implicit 300 days.

Below is the implicit timeline of the US SEC approving the listing of Bitcoin spot ETFs:

• 2013: Cameron and Tyler Winklevoss, founders of the Gemini cryptocurrency exchange, record the first-ever spot Bitcoin ETF exertion with the SEC. Grayscale launches the Bitcoin Investment Trust.
• 2017: Citing concerns astir the asset’s marketplace maturity and manipulation, the SEC rejects the Winklevoss ETF application.
• 2018: The SEC rejects the refiled ETF exertion from the Winklevoss twins by citing inadequate marketplace controls.
• 2020: Grayscale converts its spot into an SEC reporting entity, aiming to summation the transparency of funds.
• 2021: The SEC approves the archetypal US Bitcoin futures ETF exertion filed by ProShares portion continuing to cull spot ETF applications.
• 2023: Grayscale sues the SEC aft the rejection of its exertion to person its Bitcoin spot into a spot ETF. A US Appeals Court rules that the SEC failed to warrant the rejection, frankincense forcing it to reconsider the application.
• Mid-2023: The world’s largest plus manager, BlackRock, files for a spot Bitcoin ETF. A question of spot Bitcoin ETF applications follows from firms specified arsenic Fidelity, Franklin Templeton, WisdomTree and others.
• Jan. 10, 2024: The SEC approves 11 spot Bitcoin ETFs, which statesman trading connected US exchanges the pursuing day.

Since then, the inflows and outflows of these ETFs person varied on with the sentiment of the market, but they person broken aggregate records and are expected to proceed to bash truthful owed to organization involvement successful the asset. The illustration beneath shows the regular inflows and outflows of the US BTC spot ETFs since their motorboat connected Jan. 11, 2024.

According to calculations aligned with the modern portfolio mentation (MPT), the Sharpe ratio of a portfolio tin beryllium optimized astir a 16% allocation to Bitcoin, arsenic revealed successful a report by Galaxy released connected May 27, 2025. 

• Modern portfolio mentation (MPT): It is simply a model developed by Nobel Laureate Harry Markowitz successful the 1950s to conception optimal concern portfolios. Since then, it has been utilized arsenic a trusted analytical instrumentality to exemplary scenarios of an perfect portfolio allocation to antithetic plus classes.
• Sharpe ratio: This metric measures the risk-adjusted instrumentality of an investment. It’s a mode to measurement however overmuch instrumentality you’re getting for the hazard you’re taking.

At this level of portfolio allocation, the Sharpe ratio for BTC would beryllium astir 0.94. In comparison, the estimated Sharpe ratio of US Treasury bonds is betwixt 0.3 and 0.5, per information from Curvo. This means US Treasury bonds connection little instrumentality for the aforesaid level of risk. In elemental terms, Bitcoin gives you astir 0.94% other instrumentality for each 1% of risk, making it a much businesslike concern than bonds if you’re comfy with the higher risk. 

Did you know? On June 9, 2025, BlackRock’s iShares Bitcoin Trust ETF (IBIT) became the fastest ETF successful past to surpass $70 cardinal successful AUM. As elder Bloomberg ETF expert Eric Balchunas showed connected X, the money reached this people successful conscionable 341 days, 5 times faster than the SPDR Gold Shares (GLD) ETF, the erstwhile grounds holder.

Bitcoin oregon sovereign bonds: Which 1 is much lucrative to investors successful 2025?

There are respective reasons wherefore adjacent risk-averse investors are considering investing successful Bitcoin alternatively of sovereign bonds — from yield, volatility, regulatory considerations and accessibility, among others.

Below is simply a comparative overview of the 2 plus classes and their unsocial features for investors:

While the returns connected Bitcoin are not assured, the asset’s terms reached an all-time precocious of $112,087.19 connected June 10, 2025. PlanB’s stock-to-flow model estimates that, astatine the complaint arsenic of June 12, mining the full BTC proviso would instrumentality astir 55 years, without accounting for halving events.  Accounting for halving events, the full proviso of 21 cardinal Bitcoin will beryllium mined by 2140. This debased complaint of inflow into the proviso contributes to the communicative that Bitcoin is simply a scarce asset, which volition lone go scarcer arsenic Bitcoin halving events chopped down the artifact rewards connected each caller artifact mined connected the web by 50%.

Billionaire investors similar Larry Fink, Stanley Druckenmiller and Paul Tudor Jones are progressively turning to Bitcoin arsenic a hedge against ostentation and authorities mismanagement. Fink sees Bitcoin arsenic a modern alternate to golden amid what helium calls the highest embedded ostentation successful decades. 

Druckenmiller not lone supports Bitcoin but has openly shorted US bonds, criticizing the Fed’s complaint argumentation arsenic disconnected from marketplace reality. Meanwhile, Jones warns of spiraling US indebtedness and expects policymakers to inflate their mode out, reinforcing Bitcoin’s entreaty arsenic a store of value. Collectively, these Wall Street titans are signaling a shift: agelong Bitcoin, abbreviated bonds.

Did you know? Michael Saylor’s Strategy (previously known arsenic MicroStrategy) has acquired 582,000 BTC since the institution started purchasing the tokens successful August 2020. These tokens were purchased astatine an mean outgo of $70,086 pursuing its latest purchase of 1,045 BTC connected June 9. Strategy presently owns 2.771% of the maximum capped proviso of Bitcoin.

How Bitcoin’s fixed proviso and casual entree are disrupting accepted portfolio structures

The Bitcoin network’s inception led to the commencement of a caller fiscal plus class. BTC is 1 of the lone assets successful the satellite that is immutable, provenly scarce and has a permanently capped supply. 

Because it’s hardcoded successful the halfway protocol of the network, determination tin ne'er beryllium much than 21 cardinal Bitcoin minted. As of June 11, 2025, implicit 19.8 cardinal BTC has been minted, per Bitbo data. This accounts for 94.6% of the full supply. 

On May 26, the Bitcoin network’s hashrate deed an all-time precocious of 913 exahashes per 2nd (EH/s), a 77% summation from the 2024 debased of 519 EH/s. The hashrate represents the full computational powerfulness that is utilized by the proof-of-work miners to validate transactions and adhd blocks to the network. This entails that miners progressively request to walk much computational powerfulness to lend to the network.

In contrast, the proviso of sovereign bonds is acceptable by the government, which tin contented caller bonds erstwhile needed. Thus, determination is nary cognition of scarcity for bonds issued by the government.

Additionally, sovereign bonds are heavy constricted by a fewer factors, particularly for retail investors:

• Limited platforms for access: Retail investors often cannot entree authorities bonds straight and person to trust connected intermediaries similar plus managers, banks oregon brokers.
• Complex colony infrastructure: These bonds are typically cleared done organization colony houses similar Euroclear and Clearstream, which aren’t designed for retail usage.
• Lack of contiguous liquidity: Government bonds are lone disposable to investors during the trading hours of that peculiar country, which doesn’t let investors to unwind their presumption extracurricular marketplace hours, connected weekends and connected slope holidays.
• Foreign sovereign bonds: Purchasing overseas sovereign bonds requires investors to person entree to planetary brokerage accounts and besides involves currency hazard and important geopolitical risk.

Since Bitcoin is simply a decentralized and accessible plus with 24/7 availability, it overcomes galore of the challenges that investing successful sovereign bonds could pose. Additionally, arsenic crypto wallets proceed to amended idiosyncratic acquisition and simplify onboarding, and arsenic entree to some centralized and decentralized crypto exchanges expands, Bitcoin is becoming adjacent much accessible astatine a accelerated pace. This easiness of access, erstwhile compared to sovereign bonds, is bound to assistance investors contemplating the displacement from sovereign bonds to BTC.