Bitwise CIO: The current short-term weakness in Bitcoin is a gift

By Matt Hougan, Chief Investment Officer, Bitwise

Compilation: Deep Tide TechFlow

The U.S. government established a strategic reserve of bitcoin last week. Let's first quietly consider the weight of this sentence.

After the birth of Bitcoin – fifteen years of ridicule and skepticism, from being called a "pet rock" to "rat poison in square times" – the U.S. government finally defined Bitcoin as a "strategic" asset and made it clear that these assets "must not be sold."

This is a historic milestone that will propel Bitcoin to new all-time highs. Congratulations to those who believed in this possibility before it all became a trend.

But for now, we need to discuss how the market reacted to the news.

Fifteen years after the birth of Bitcoin – after more than a decade of ridicule and skepticism, known as the "pet stone" and the "square of rat poison" – the U.S. government has declared Bitcoin a "strategic" asset that "cannot be sold."

This is a historic milestone that will help propel Bitcoin to new all-time highs over time. Congratulations to everyone who believed in this possibility before this point became popular.

But now we have to talk about how the market has embraced the news.

The market reacted and where it went wrong

Despite the historical significance of this statement, Bitcoin has fallen sharply recently. As I write this memo, Bitcoin has fallen 13% from its peak of over $92,000 on Thursday to below $80,000, its lowest level since November 2024.

There were multiple reasons for this wave of declines, including heightened economic concerns and a general pullback in equities unrelated to the reserve announcement. But there's no doubt about it: part of the reason for the pullback is the reserve announcement itself

As stated in this article from Barron's, crypto investors were disappointed that the government did not announce plans to buy more bitcoin immediately. Instead, the government said the reserves would be funded by confiscated assets already owned by the federal government.

The market's disappointment is ridiculous from multiple perspectives.

First of all, simply "not selling" the government's existing holdings is already a major victory. The United States currently holds about 200,000 bitcoins, worth about $16 billion. Under the previous administration, most or all of these bitcoins were originally planned to be sold in 2025. It is already important to eliminate this potential selling pressure in the market.

Second, I think the market is grossly underestimating the likelihood that the government will soon start buying more Bitcoin. I encourage you to read this executive order in its entirety. It clearly states:

"Secretaries of the Treasury and Commerce should develop strategies for obtaining additional government bitcoin, provided that these strategies are budget-neutral (i.e., they have no impact on the budget) and do not impose additional costs on U.S. taxpayers." (emphasis added)

Note that the EO does not use the words "may" or "could", but "should". As a former speechwriter for federal officials, I can tell you that the wording in such official statements is carefully considered.

"Should" has a specific meaning here, and the market seems to be ignoring that.

But the most absurd thing about the market's skepticism is that investors are not focusing on the right questions at all.

The only question that matters about Bitcoin

The only question that matters to Bitcoin for long-term investors is: Will Bitcoin become a global macro asset of geopolitical importance like gold?

More countries will include Bitcoin in their strategic reserves...... Or less? There will be more sovereign wealth funds investing in Bitcoin...... Or less? Its role in the global financial markets will become even greater...... Or is it smaller?

If Bitcoin does play a global role, here's my opinion: it will become a $10-50 trillion asset, meaning 5-25 times the return space relative to the current price. If not, it will become a footnote to history, hovering below $150,000 and backed only by a small group of liberals, cypherpunks, and speculators.

There is no middle ground. Bitcoin is either globally significant or unimportant.

Keeping this question in mind allows us not to be distracted by short-term noise. Would it be nice for the government to buy 100,000 bitcoins? Of course – this could immediately give the price an immediate 20% increase from current levels. I have absolutely no problem with that.

But this is not as important as the question of whether Bitcoin can become an important macro asset in the world. From this point of view, the strategic reserve is a huge step forward. This is the U.S. government's message to the world that "Bitcoin matters." This would mean a lot for other countries that might consider building their own strategic reserves, from the Czech Republic and El Salvador to China, Russia and India. Do you think they would prefer to enter before or after the U.S. starts a big move?

That's why, despite the current investor worries and market volatility, I see only one important conclusion:

This short-term weakness is a gift.