A monthly research report from Bitwise’s European arm published this week pegs the theoretical “fair value” of bitcoin at roughly $224,000 if the asset were widely adopted as portfolio insurance against G20 sovereign debt defaults.
However, the research team described the figure as an “illustrative figure implied by the model, not a price target or forecast.”
The figure arises from a theoretical framework first proposed by analyst Greg Foss in 2021, which treats bitcoin as a credit default swap on sovereign bonds.
Because the bitcoin network has no central issuer and operates without sovereign backing, Foss’ model frames it as an uncorrelated hedge against the possibility of major sovereign defaults.
The implied fair value of $224,000 depends on the weighted probability of default between the group 20 sovereigns (G20) and the market capitalization of the bonds that are theoretically insured.
The argument was based on tensions in sovereign 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 will borrow $29 trillion from bond markets this year, 17% more than in 2024, with the IMF describing markets as becoming less forgiving and investors increasingly questioning the limits of sovereign borrowing capacity.
Bitwise highlighted Japan’s JGB market as particularly vulnerable, citing its size of about $7.5 trillion as the world’s second-largest sovereign bond market, Japanese investors’ roughly $1.2 trillion in U.S. Treasury holdings, 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 levels since the 2011-2012 European debt crisis on major sovereign bonds.
But the report also pointed out some near-term headwinds for bitcoin.
Higher global bond yields have made Strategy’s STRC Perpetual Preferred Stock (MSTR) dividends less attractive to investors, and STRC has recently traded below par.
Strategy purchases have accounted for roughly two-thirds of institutional bitcoin demand across global treasury companies and bitcoin ETPs year-to-date through 2026, according to Bitwise’s count, meaning a stagnation in Strategy’s STRC-funded accumulation could materially impact flow.
The bullish scenarios Bitwise describes depend on monetary policy and sovereign stress.
A Fed pause under newly confirmed Chairman Kevin Warsh against rising inflation could push real yields lower, which the report cited as a historic tailwind for bitcoin. A sovereign bond capitulation that forces central bank intervention to safeguard financial stability could validate bitcoin’s role as a decentralized hedge against sovereign counterparty risk.
In terms of valuation, the report noted one of the most extreme divergences between bitcoin and US large-cap tech that it has ever observed. Bitcoin’s market value to realized value ratio sits in the lower half of its historical distribution, with only 36% of historical readings below the current level.
The NASDAQ 100’s price-to-book ratio, on the other hand, is at its highest level on record, with 99% of historical readings below the current level.
Bitcoin was trading near $66,300 on Wednesday after falling from more than $71,000 earlier this week.
