Original author: Matt Hougan, Chief Investment Officer of Bitwise
Original translation: Luffy, Foresight News
Last week, the U.S. government established a strategic reserve of Bitcoin.
Let this sentence stay in your mind for a moment.
In the 15 years since Bitcoin was born, it has been ridiculed and questioned, with people calling it a pet rock or rat poison squared. Today, 15 years later, the US government has declared that Bitcoin is a strategic asset that may not be sold.
This is a historic milestone that, in time, will help Bitcoin reach new all-time highs. Congratulations to those who believed in this possibility before this.
But now, we have to talk about the markets reaction to this news.
The market is wrong
Despite the historic nature of this announcement, Bitcoin has seen a sharp drop in price in recent days. As I write this memo, Bitcoin has fallen 13% from over $92,000 on Thursday to below $80,000, a level not seen since November 2024.
There are many reasons for the decline, including growing recession fears and a pullback in U.S. stocks that had nothing to do with the reserve announcement. But make no mistake: some of the pullback was due to the announcement itself.
As this Barron’s article explains, cryptocurrency investors are frustrated because the government has not announced immediate plans to buy more Bitcoin. Instead, the government said the reserve will be financed by assets that the federal government has already seized.
The markets disappointment is ridiculous for several reasons.
For one, simply not selling existing Bitcoin holdings is a big win. The U.S. currently holds about 200,000 Bitcoins, worth about $16 billion. Most or all of these Bitcoins were originally scheduled to be sold by 2025 during the previous administration. The reserve policy removes this huge selling pressure hanging over the market.
Second, I think the market is seriously underestimating the likelihood that the government will start buying more Bitcoin in the short term. I recommend you read the executive order in full. It clearly states:
“The Secretaries of the Treasury and Commerce should develop strategies for acquiring additional bitcoin, provided that such strategies are budget-neutral and do not impose additional costs on American taxpayers.”
Notice that it’s not “may” or “could”; it’s “should.” Having worked for a while as a speechwriter for federal officials, I can tell you that the words used in official statements are carefully chosen.
There is a deeper meaning to the word should here, which I think the market has overlooked.
The most ridiculous reason for market skepticism is that investors are focusing on entirely the wrong issues.
The only critical question about Bitcoin
If you are a long-term investor, the only critical question about Bitcoin is: Will Bitcoin become a geopolitically important global macro asset like gold?
Will more countries include Bitcoin in their strategic reserves… or less? Will more sovereign wealth funds invest in Bitcoin… or less? Will it play a larger role in global financial markets… or a smaller one?
In my opinion, if Bitcoin is truly globally relevant: it will be a $10-50 trillion asset, which would imply a 5-25x return from current prices. If it is irrelevant, it will be a footnote in history, hovering below $150,000, supported only by a small group of libertarians, cypherpunks, and speculators.
There is no middle ground. Bitcoin will either play a major role in the world, or it will be irrelevant.
Keeping this in mind, we can block out the short-term noise. It would be nice for the government to buy 100,000 bitcoins, which would probably immediately increase the price by 20% from current levels.
But this is far less important than the question of whether Bitcoin can become a globally important macro asset. From this perspective, the strategic reserve is a big step forward. It is the US governments statement to the world: Bitcoin is important. This means a lot to other countries, from the Czech Republic and El Salvador to China, Russia and India, which may be considering building their own strategic reserves. Do you think they are willing to enter the market before the US big move, or after?
Thats why, despite all the worry and anxiety among investors today, I see a major opportunity. The current short-term weakness is a gift.
