Author: Matt Hougan, Chief Investment Officer at Bitwise

Compiled by: Luffy, Foresight News

Last week, the U.S. government established a strategic Bitcoin reserve.

Let that sentence sink in for a moment.

In the 15 years since Bitcoin's inception, it has been mocked and questioned, with people calling it a "pet rock" or "the square of rat poison." Yet 15 years later, the U.S. government has declared Bitcoin a "strategic" asset that "shall not be sold."

This is a historic milestone, and in time, it will help propel Bitcoin to new all-time highs. Congratulations to those who believed in this possibility before it happened.

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

The Market Is Wrong

Despite the historic significance of this announcement, Bitcoin's price has dropped sharply in recent days. 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.

There are many reasons for this decline, including growing recession fears and a broader U.S. stock market pullback unrelated to the reserve announcement. But make no mistake: some of the pullback is due to the announcement itself.

As this Barron's article points out, crypto investors are disappointed that the government did not announce immediate plans to buy more Bitcoin. Instead, the government said the reserve would be funded by assets already seized by the federal government.

The market's disappointment is utterly absurd, for a few reasons.

First, the mere fact that the government "shall not sell" its existing Bitcoin holdings is a huge win. The U.S. currently holds around 200,000 Bitcoin, worth about $16 billion. Under the previous administration, much or all of this Bitcoin was planned to be sold off by 2025. The reserve policy eliminates this massive overhang on the market.

Second, I believe the market is severely underestimating the likelihood that the government will soon begin buying more Bitcoin. I encourage you to read the executive order closely. It states explicitly:

"The Secretary of the Treasury and the Secretary of Commerce shall develop a strategy for acquiring additional Bit, provided that such a strategy is budget-neutral and does not impose additional costs on American taxpayers."

Note that it says "shall," not "may" or "can." As someone who has written speeches for federal officials, I can tell you that the language in official statements is carefully chosen.

The use of "shall" here is significant, and I believe the market is missing this point.

The Only Question That Matters for Bitcoin

If you are a long-term investor, the only question that truly matters for 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 more important role in global financial markets... or a less important one?

In my view, if Bitcoin does indeed become globally significant: it will be a $10-50 trillion asset, meaning 5-25x upside from current prices. If it becomes irrelevant, it will be a historical footnote, languishing below $15,000, supported only by a small group of libertarians, cypherpunks, and speculators.

There is no middle ground. Bitcoin either plays a major global role, or it is meaningless.

Keep this question in mind, and you can filter out the short-term noise. The government buying 100,000 Bitcoin is certainly nice, and could push the price up 20% or so in the near term.

But it pales in comparison to the question of whether Bitcoin becomes a globally important macroeconomic asset. From that perspective, the strategic reserve is a huge step forward. It is the U.S. government telling the world: "Bitcoin matters." This is hugely significant for other countries, from the Czech Republic and El Salvador to China, Russia, and India, who may now be considering establishing their own strategic reserves. Do you think they will want to get in before or after the U.S. makes a big move?

That is why, even as investors fret and worry in the short term, I see a major opportunity. The current near-term weakness is a gift.