Bitcoin Enthusiasts Claim Bitcoin Outperforms U.S. Treasury Bills

Phrases like “Bitcoin is the hurdle rate” and “Bitcoin is the new hurdle rate” are frequently used in Bitcoin communities, often without context. This motto suggests that Bitcoin is the best benchmark for investment, and investors should avoid anything that yields lower returns than Bitcoin. The hurdle rate indicates the minimum return that makes an investment or a project viable. It is used to decide whether to start a business project or make an investment. If the hurdle rate is too high, the project or investment may be rejected. To determine a hurdle rate, one considers costs, inflation, interest rates, and potential risks. Some companies use their weighted average cost of capital (WACC) as a reference for the hurdle rate, while others add a risk premium to WACC for a safer hurdle rate. The return on investment rate should be above the hurdle rate for the investment to be viable. The current yield on 10-year U.S. Treasury bills is often used as a benchmark when calculating the hurdle rate, as it serves as the risk-free rate, since other investments are typically riskier. Some models use 3-month treasury bills instead. Bitcoin enthusiasts challenge this by saying Bitcoin is the hurdle rate.

There are at least two messages attached to the “Bitcoin is the hurdle rate” motto. First, bitcoiners point out the poor performance of the U.S. Treasury bills compared to Bitcoin’s performance. The second meaning is that sometimes you should just buy Bitcoin instead of trying to find a better-performing investment. Bitcoin enthusiasts emphasize Bitcoin’s predictability, citing the hard supply cap of nearly 21 million units, the pre-programmed issuance of new bitcoins, and predetermined dates of halvings. Additionally, Bitcoin exhibits strong long-term price appreciation. In the past, there were no negative returns in any 5-year period. The constant long-term value accumulation is cited as one of the main reasons for the inclusion of Bitcoin in various state or corporate reserves. None of these is the case for the U.S. Treasury bills, nor for gold, which is an asset most frequently compared with Bitcoin. While U.S. Treasury bills are usually chosen as the benchmark for the hurdle rate because they are considered a risk-free asset, many admit that risks are there. Bitcoin’s recognition by governments, financial institutions, corporations, and high-profile financial experts may solidify Bitcoin’s reputation as the benchmark. Bitcoin treasury companies emphasize that Bitcoin yield outperforms yield from other assets, so the accumulation of Bitcoin and releasing stocks that expose buyers to indirect “ownership” of Bitcoin is presented as a viable strategy. However, hard-core Bitcoin enthusiasts warn that holding Bitcoin self-custody is safer than outsourcing BTC ownership to a centralized third party.

Some Bitcoin purists ridicule the idea that Bitcoin is the new hurdle rate, notably those critical towards Bitcoin treasury companies. The logic is clear: as the Bitcoin treasury companies’ frontmen weaponized the hurdle rate concept, it may be seen as a gimmick to promote these companies’ stocks as performing as well or even better than Bitcoin. They often discuss Bitcoin while selling traditional stocks to their clients. So, generally, “Bitcoin is the hurdle rate” can serve as an economic observation, a slogan for treasury companies, or at least a Crypto Twitter meme.