Bitcoin addresses the problem of the devaluation of fiat currencies due to careless spending and borrowing. As government spending increases someone needs to buy up the Treasury bonds in order to enable this spending.
However, as of October 31st, 2021 the interest rate for the 10-year Treasury bond is 1.55% - lower than the Federal Reserve's target inflation rate of 2% - making it a guaranteed loss for these investors.
As investors such as banks, hedge funds and foreign governments begin to slow down their purchases, a decrease in demand will drop U.S bond prices. As a result, the Fed will have to decide on whether to inflate the money supply or to allow higher interest rates.
Based off history and political pressure, it is almost guaranteed for the first option to occur - inflating the money supply - therefore decreasing the inflation-adjusted returns on treasury bonds, again incentivizing investors away from treasuries causing them to fall.𝘺𝘪𝘬𝘦𝘴
Ultimately, investors will then turn to sound money purchasing greater stores of value such as Bitcoin and other assets, while the Fed purchases bonds to control the interest rates.
Although the U.S. Treasury bonds have been the world's preferred reserve asset, the trillions of dollars of debt (and only increasing) that the U.S. has accumulated since 1971 makes it very unlikely for the treasury bonds to remain as such.
Overtime as Bitcoin increases in liquidity the US will prove to be less creditworthy. Investors, foreign governments and companies are likely to then begin replacing their treasury bond purchases with Bitcoin instead in order to protect themselves against inflation.
Although Bitcoin becomes competition against treasury bonds, it would be a huge mistake for the US government to try to restrict the exchange of Bitcoin. Doing that will prove that the US no longer trusts in the dollar's competitiveness, jeopardizing its borrowing ability.
Instead the US must embrace Bitcoin especially as they are more likely to benefit the most from bitcoin-related ventures compared to China's authoritarian financial structure preventing Bitcoin development there. Bitcoin's open network fits most with the US's free market system.
Nevertheless, trying to save the treasury bonds will hold back the US from continuing its current lead in innovation and encourage more debt. Instead Bitcoin creates an opportunity for Americans creating jobs, wealth, and protecting themselves against government-driven inflation.
"Outside, I look like I'm calm Inside, I'm a tickin' time bomb" - Eminem