Author: Matt·Hougan, Chief Investment Officer of Bitwise; Tong Deng, Jinse Finance

What is the truly important thing about the strategic Bitcoin reserve.

The U.S. government established a strategic Bitcoin reserve last week.

Please take some time to think about these words.

Fifteen years after the birth of Bitcoin - which people have called "pet rocks" and "rat poison" - the U.S. government has declared Bitcoin a "strategic" asset that cannot be sold.

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

But now we must talk about how the market is viewing this news.

Market reaction and its erroneous reasons

Although the statement is historic, Bitcoin has fallen sharply in recent days. At the time of writing this memo, Bitcoin has fallen 13% from its Thursday high of over $92,000 to below $80,000, the lowest level since November 2024.

There are many reasons for this move, including heightened economic concerns and a general market pullback unrelated to the reserve announcement. But make no mistake: part of the pullback is due to the announcement itself.

As this Barron's article explains, crypto investors are uneasy because the government did not announce immediate plans to buy more Bitcoin. Instead, it stated that the reserve will be capitalized by forfeited assets already owned by the federal government.

The market's disappointment is absurd, for several reasons.

First, simply "not selling" the government's existing assets is a major victory. The U.S. currently holds about 200,000 Bitcoin, worth about $16 billion. Under the previous administration, most or all of that Bitcoin was planned to be sold by 2025. Eliminating this overhang of supply in the market is hugely significant.

Second, I believe the market is greatly underestimating the likelihood that the government will actually start buying more Bitcoin in the near term. I encourage you to read the executive order in full. Among other things, it explicitly states that:

"The Secretary of the Treasury and the Secretary of Commerce shall develop a strategy for acquiring additional government-held Bitcoin, provided that such strategies do not impact the budget and do not impose incremental costs on U.S. taxpayers." (Emphasis added.)

Note that it does not say the Secretaries "may" or "can"; it says they "shall." In my career, I've written speeches for federal officials, and I can tell you that the words in official statements are carefully chosen.

"Shall" here means something, and I think the market is overlooking that.

But the biggest reason the market's skepticism is absurd is that investors are simply focusing on the wrong question.

The only important question about Bitcoin

If you are a long-term investor, the only important question about Bitcoin is: will Bitcoin become a globally important macroeconomic asset like gold?

Will more countries add Bitcoin to their strategic reserves... or fewer? Will more sovereign wealth funds invest in Bitcoin... or fewer? Will it play a larger role in global financial markets... or a smaller one?

If Bitcoin does indeed become globally significant, my view is that: it will be a $10-50 trillion asset, meaning 5x to 25x returns from current prices. If not, it will be a historical footnote, hovering below $150,000, supported only by a small fringe of libertarians, crypto-enthusiasts, and speculators.

There is no middle ground. Bitcoin is either globally important, or it is not.

Keeping this question in mind can help drown out the short-term noise. If the government steps in and buys 100,000 Bitcoin, would that be great? Of course - it could immediately drive the price 20% higher from current levels. I wouldn't object to that.

But that's not as important as whether Bitcoin will become a globally important macroeconomic asset. From that perspective, the strategic reserve is a big step forward. It's the U.S. government sending a signal to the world that "Bitcoin matters." That matters to other countries - from the Czech Republic and El Salvador to China, Russia, and India - who may be considering building their own strategic reserves. Do you think they're more likely to join before or after the U.S. takes this major action?

That's why, despite the intense volatility and anxiety of investors today, I see a big harvest.

This short-term weakness is a gift.