Author: Matt Hougan, Chief Investment Officer at Bitwise

Translated by: TechFlow

Last week, the US government established a strategic Bitcoin reserve. Let's pause and reflect on the weight of that statement.

Fifteen years after the birth of Bit, having endured over a decade of mockery and skepticism - from being called a "pet rock" to "the square of rat poison" - the US government has finally defined Bit as a "strategic" asset, and explicitly stated that these assets "shall not be sold".

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

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

Fifteen years after the birth of Bit - having endured over a decade of mockery and skepticism, with people calling it a "pet rock" and "the square of rat poison" - the US government has announced that Bit is a "strategic" asset that "shall not be sold".

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

But now we must talk about how the market has reacted to this news.

Market Reaction and Its Flaws

Despite the historic nature of this announcement, Bit has recently seen a significant decline. At the time of writing this memo, Bit has fallen 13% from its Thursday peak above $92,000, dropping below $80,000, its lowest level since November 2024.

There are multiple reasons for this pullback, including heightened economic concerns and a broader market correction unrelated to the reserve announcement. But there's no doubt that the reserve announcement itself is partly to blame for the selloff.

As this Barron's article points out, crypto investors are disappointed that the government did not announce immediate plans to purchase more Bit. Instead, the government stated that the reserve will be funded by forfeited assets already owned by the federal government.

The market's disappointed reaction is absurd from multiple angles.

First, simply "not selling" the government's existing holdings is already a major victory. The US currently holds around 200,000 Bit, worth about $16 billion. Under the previous administration, most or all of these Bit were planned to be sold off by 2025. Eliminating this potential selling pressure in the market is already significant.

Secondly, I believe the market is severely underestimating the likelihood that the government will quickly begin purchasing more Bit. I encourage you to read the executive order in full. It explicitly states:

"The Secretary of the Treasury and the Secretary of Commerce shall develop strategies to acquire additional government Bit, provided that such strategies are budget-neutral (i.e., have no impact on the budget) and do not impose additional costs on American taxpayers." (emphasis added)

Note the use of "shall" rather than "may" or "can." As someone who has written speeches for federal officials, I can tell you that the wording in these official statements is carefully chosen.

"Shall" here has a specific meaning, and the market seems to be ignoring this.

But the most absurd part of the market's skepticism is that investors are focused on the wrong question altogether.

The Only Important Question About Bit

For long-term investors, the only important question about Bit is: Will Bit become a globally important macroeconomic asset like gold?

Will more countries adopt Bit into their strategic reserves... or fewer? Will more sovereign wealth funds invest in Bit... or fewer? Will its role in global financial markets grow... or shrink?

If Bit does indeed become globally significant, in my view it will become a $10-50 trillion asset, implying 5-25x returns from current prices. If not, it will become a historical footnote, languishing below $15,000, supported only by a small group of libertarians, cypherpunks, and speculators.

There is no middle ground. Bit either becomes globally significant, or it doesn't matter.

Keeping this question in mind can insulate us from short-term noise. Would the government buying 100,000 Bit be great? Of course - it could immediately drive the price up 20% from current levels. I have no objection to that.

But it is not as important as whether Bit can become a globally significant macroeconomic asset. From this perspective, the strategic reserve is a huge step forward. It is the US government signaling to the world that "Bit is important." This is significant for other countries that may consider establishing their own strategic reserves - from the Czech Republic and El Salvador to China, Russia, and India. Which do you think they are more likely to do, before or after the US starts making major moves?

That is why, despite the current investor anxiety and market volatility, I see only one important conclusion:

This short-term weakness is a gift.