Why are some investors making the shift?

Why are some investors choosing Bitcoin over government bonds?

Historically, sovereign bonds like the US Treasurys, Japanese government bonds and German Bunds have been go-to assets for risk-averse investors. They are usually perceived to be minimal-risk assets offering steady returns. However, since the emergence of Bitcoin 13 years ago, the narrative of Bitcoin as an alternative to bonds has been gradually growing in the minds of investors.

The interplay between the Federal Reserve’s balance sheet and the M1 and M2 money supply is also a significant consideration to help understand why some investors are shifting to Bitcoin (BTC). 

• The M1 money supply is a measure of the total amount of money readily available in an economy. It includes the most liquid assets: cash, demand deposits (checking accounts) and other similar checkable deposits.
• The M2 money supply is a wider measure of money supply than M1. It includes all of the M1 assets, combined with savings deposits, retail money market funds (MMFs) and small-time deposits.

The US Federal Reserve’s actions on expanding and shrinking its $6.69-trillion balance sheet directly influence the M1 and M2 supply, which in turn affect inflation, bond yields and investor confidence in fiat assets. When the Fed adds or removes money, it changes how much cash (M1) and savings (M2) are available. These changes affect inflation, how much interest bonds pay and how much people trust traditional (fiat) money.

In the past few years, the Fed has kept the federal funds rate in a high range between 4% and 5% and has also signaled that rate cuts might not be necessarily imminent. On May 26, 2025, Moody’s downgraded the US debt rating from AAA to AA1, citing fiscal instability and political dysfunction.

Additionally, the Japanese bond crisis of 2024-2025 exemplified how a shift in the relationship between bond demand and yields, amplified by US tariff policies, can impact investor sentiment and the safe haven status of government debt. In this macroeconomic scenario, Bitcoin is increasingly cementing its position as a hedge against inflation. 

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

Did you know? The Bitcoin Core developers have decided to increase the OP_RETURN data transaction limit from 80 bytes to 4 megabytes, as confirmed in an