Bitwise Chief Investment Officer: The significance of BTC strategic reserves is underestimated

Original author: Matt Hougan, Chief Investment Officer at Bitwise

Original compilation: Luffy, Foresight News

Last week, the US government established a strategic reserve of Bitcoin.

Let this sentence linger in your mind for a moment.

Over the 15 years since the birth of Bitcoin, it has been mocked and questioned, referred to as a 'pet rock' or 'rat poison squared'. And today, 15 years later, the US government declares Bitcoin to be a 'strategic' asset and 'not to be sold'.

This is a historic milestone, and in due course, it will help Bitcoin reach a new all-time high. Congratulations to those who believed in this possibility beforehand.

But now, we need to talk about the market's reaction to this news.

The market is wrong

Despite the historic significance of this declaration, the price of Bitcoin has recently dropped significantly. As I write this memo, Bitcoin has fallen 13% from over $92,000 on Thursday to below $80,000, the lowest level since November 2024.

The decline this time has many reasons, including escalating economic recession concerns and unrelated U.S. stock market pullbacks to the reserve statement. But don't get it wrong: some of the pullbacks are indeed due to the statement itself.

As the article in Barron's Weekly pointed out, cryptocurrency investors are frustrated because the government has not announced plans to immediately buy more Bitcoin. Instead, the government stated that the reserves will be funded by assets already seized by the federal government.

The market's disappointment is ridiculous for the following reasons.

First, the government's decision to 'not sell' its existing Bitcoin holdings is a major victory. The United States currently holds about 200,000 Bitcoins worth around $16 billion. During the previous government's term, most or all of these Bitcoins were originally planned to be sold by 2025. The reserve policy eliminates the massive selling pressure hanging over the market.

Secondly, I believe the market has seriously underestimated the possibility of the government starting to buy more Bitcoin in the short term. I suggest you read the entire executive order. It explicitly states:

The Secretary of the Treasury and the Secretary of Commerce should develop a strategy to acquire additional bitcoins, provided that such a strategy remains budget-neutral and does not impose additional costs on American taxpayers.

Please note that the word used here is not 'can' or 'able to'; it is 'should'. Having served as a speechwriter for a federal official for a period of time, I can tell you that the wording in official statements is carefully chosen.

There should be a deeper meaning to "应该" here, and I think the market has overlooked this.

The most absurd reason for the market's skepticism is that investors are focusing on the wrong issues.

The Only Key Issue with Bitcoin

If you are a long-term investor, the only key question for Bitcoin is: will Bitcoin, like gold, become a globally important macro asset with geopolitical significance?

Will more countries include Bitcoin in their strategic reserves... or fewer? Will more sovereign wealth funds invest in Bitcoin... or fewer? Will it play a more important role in the global financial markets... or a less significant role?

In my view, if Bitcoin is indeed significant on a global scale: it will become an asset worth 10 - 50 trillion dollars, which means there is still a return of 5 - 25 times from the current price. Conversely, if it is insignificant, it will become a footnote in history, hovering below 150,000 dollars, supported only by a small group of libertarians, cypherpunks, and speculators.

There is no middle ground. Bitcoin either plays a significant role globally or is meaningless.

Remembering this issue can shield short-term noise. Of course, it's great for the government to buy 100,000 bitcoins, which may immediately push the price up by 20% from the current level.

But this is far less important than whether Bitcoin can become a globally significant macro asset. From this perspective, strategic reserves are a big step forward. This is the US government's declaration to the world: 'Bitcoin is important.' This is significant for other countries. From the Czech Republic, El Salvador to China, Russia, and India, these countries may be considering establishing their own strategic reserves. Do you think they are willing to enter the market before or after the US makes a big move?

That's why, despite investors' worries and anxieties today, I see a great opportunity. The current short-term weakness is a gift.