The Revaluation of U.S. Assets to Back the Dollar with Bitcoin: A Thought Experiment
Introduction: A Fun but Eye-Opening Thought Experiment
Bitcoin is often referred to as "digital gold", and some proponents argue it could serve as a reserve asset for a future monetary system. While the U.S. dollar currently operates as a fiat currency, this thought experiment explores what would happen if the U.S. fully backed its money supply with Bitcoin. This is not a prediction but a mathematical and historical analysis that demonstrates the magnitude of monetary expansion and the feasibility of a Bitcoin-backed dollar.
1. The Current Monetary Landscape
To determine what it would take for Bitcoin to fully back the U.S. money supply, we use:
- Total U.S. M2 Money Supply (2024): ~$20.9 trillion
- Total Bitcoin Supply (Fixed at 21 Million BTC)
- Current Bitcoin Price (2025): ~$96,790 per BTC
- Total Bitcoin Market Cap: ~$2 trillion
Since Bitcoin is capped at 21 million coins, it offers a scarcity-based model for monetary stability, unlike fiat currency, which can be expanded indefinitely.
2. The Required Bitcoin Price for Full U.S. Dollar Backing
If the U.S. were to fully back its money supply with Bitcoin, the required Bitcoin price would be:
20.9 trillion USD / 21 million BTC = 995,238 USD per BTC
This means Bitcoin would need to be valued at nearly $1 million per BTC to fully back the U.S. money supply—a 10x increase from today’s price of $96,790. This illustrates:
- ✅ How much larger the U.S. monetary system is compared to Bitcoin's total value.
- ✅ The drastic price increase Bitcoin would need to become a legitimate reserve currency.
- ✅ Why Bitcoin, despite its scarcity, is still far from replacing fiat currency at current valuations.
3. Could the U.S. Use a Partial Bitcoin Standard Instead?
Historically, the U.S. dollar operated under a gold-backed ratio system rather than full convertibility. If we applied a 40% Bitcoin backing (similar to the Gold Standard in the 20th century), we get:
20.9 trillion USD × 40% / 21 million BTC = 398,095 USD per BTC
This would require Bitcoin to be valued at approximately $398,095 per BTC—still a 4x increase from today’s price but more feasible than full backing.
4. Challenges & Implications of a Bitcoin-Backed Dollar
While this is a thought experiment, it raises real-world considerations:
- ✅ Benefits of a Bitcoin-Backed Dollar
- Hard Monetary Policy – A fixed Bitcoin supply would prevent hyperinflation and excessive money printing.
- Decentralization – A Bitcoin standard would remove the Federal Reserve’s ability to manipulate interest rates and print money arbitrarily.
- Borderless Transactions – Bitcoin is a global digital asset, making international trade settlements easier.
- ❌ Challenges of a Bitcoin-Backed Dollar
- Extreme Volatility – Bitcoin fluctuates more than 50% per year, making it impractical as a stable currency.
- Insufficient Market Size – At today’s price, Bitcoin’s total market cap is ~$2 trillion, far below the $20.9 trillion needed to support full backing.
- Government Control Issues – A decentralized currency would reduce U.S. government control over monetary policy, which could be seen as a national security risk.
- Energy Usage – Bitcoin mining consumes vast amounts of energy, which could make a nationwide transition complex.
5. Could the U.S. Government Adopt Bitcoin as a Reserve Asset?
While a fully Bitcoin-backed dollar is unlikely, the U.S. could:
- Add Bitcoin to Federal Reserves, similar to how it holds gold.
- Allow Bitcoin to be used for international settlements, bypassing sanctions and restrictions.
- Introduce a digital dollar (CBDC) that incorporates Bitcoin in some capacity.
However, for Bitcoin to become a true global reserve currency, it would need to:
- Reach multi-million-dollar valuations per BTC.
- Achieve lower volatility to serve as a store of value.
- Gain broader adoption among central banks and financial institutions.
6. Conclusion: A Fun Thought Experiment with Real Takeaways
While a fully Bitcoin-backed U.S. dollar is unrealistic at current valuations, this thought experiment:
- Demonstrates the sheer size of the U.S. money supply compared to Bitcoin.
- Highlights the challenges of transitioning to a hard-money system based on a finite digital asset.
- Shows that Bitcoin would need to reach $1 million+ per BTC to act as a global reserve currency.
Bitcoin may not replace the dollar outright, but its scarcity and decentralization make it an attractive hedge against fiat instability. As governments face rising debt and inflation, Bitcoin’s role as a reserve asset could grow—but for now, the dollar remains dominant.
