Today is the best time in history to buy Bitcoin.

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: 0xjs@Golden Finance

The first time I heard about Bitcoin was in February 2011.

At that time, I was working at ETF.com, managing a team of young financial analysts running the world’s first ETF data and analysis service. We held weekly meetings to discuss what was happening in the markets. In February 2011, Bitcoin's price first broke the $1 mark, and one of my analysts mentioned this historic "dollar threshold." He then led a fascinating discussion about what Bitcoin was, how it worked, and what it might evolve into.

If I had invested $1,000 in Bitcoin after that meeting, today that investment would be worth $88 million. However, I left the office to buy a cup of coffee.

I share this story because everyone—truly everyone—has felt this way. We all wish we had bought Bitcoin earlier.

But in these stories, we overlook one point: Bitcoin faced enormous risks at that time.

For example, on the day I attended that meeting about $1 Bitcoin, the largest cryptocurrency exchange in the world was New Liberty Financial. Here are their terms of service.

In hindsight, it’s easy to say I should have bought $1,000 worth of Bitcoin. But at that time, it meant sending $1,000 to a random PayPal account. Coupled with the risks of custody, regulation, technology, and government… investing $1,000 in Bitcoin in 2011 was a huge gamble.

I share this story now for two reasons: first, to relieve you of the guilt of missing out on investing in Bitcoin back then; second, to help you believe that the situation is different now.

In fact, I believe that in terms of risk-adjusted conditions, today—right at this moment—is the best time in history to buy Bitcoin.

We have just eliminated the last major survival risk for Bitcoin

Every investment requires weighing risks against rewards. A lottery ticket can turn $1 into $1 billion, but your expected return is zero.

At the birth of Bitcoin, it was somewhat like a lottery: there was enormous upside potential, but the risks were equally great.

For instance, when Bitcoin was first launched, there was no guarantee it would even work properly. Sure, its white paper was excellent. Logically, it seemed like it should work. But before Bitcoin was launched, there had been multiple attempts to build electronic cash systems, all of which failed. (For example, you can look at the paper "How to Mint: The Cryptography of Anonymous Electronic Cash" written by the NSA in 1997.)

But in Bitcoin's early days, there were other significant risks beyond the technology itself. For years, trading was a risk factor—early trading platforms were either unreliable or plagued by low trading volumes and poor operations. It wasn't until the end of 2011, with the establishment of Coinbase, that the situation began to improve.

For a time, custody was also a risk factor—until established blue-chip companies like Fidelity began offering self-custody and institutional custody services.

In the early stages of Bitcoin's birth, there were also reasonable concerns about money laundering, criminal activity, regulatory standards, and mining centralization.

What’s amazing about Bitcoin is that over time, it has slowly but surely eliminated every one of these significant survival risks.

The launch of the Bitcoin spot ETF in January 2024 has allowed us to cross another major hurdle, providing regulatory clarity for U.S. institutional investors looking to enter this space.

But even after the ETF launch, one major survival risk has lingered in my mind: what if the government bans Bitcoin?

U.S. Strategic Bitcoin Reserve

This is the question I always mention when someone asks me in a meeting, "What keeps you up at night?"

I have been thinking about how the U.S. government confiscated privately held gold in 1933 to bolster the treasury. So why would it allow Bitcoin to develop to a scale that threatens the dollar's status?

To be honest, I didn’t know the answer at that time.

When pressed on stage, I would always remind people that the U.S. government "purchased" gold from the public in 1933: I would say that if Bitcoin developed to a scale that challenged the dollar, your investment might have already made you a fortune.

That was the best answer I could give.

But just earlier this month, President Trump signed an executive order establishing a U.S. Strategic Bitcoin Reserve. Just like that, the last major survival risk facing Bitcoin disappeared before my eyes.

Many people are wondering why the U.S. would do this. Cliff Asness, founder of hedge fund AQR Capital, immediately wrote after Trump signed the executive order: "If cryptocurrencies are a viable long-term competitor to the dollar, then why are we promoting the development of a direct competitor to our status as the world’s reserve currency?"

The answer, of course, is that Bitcoin is better than other alternatives. For the U.S., the best-case scenario is for the dollar to maintain its status as the world’s reserve currency. But if the day comes when the dollar's status is at risk, choosing Bitcoin as an alternative is certainly better than opting for currencies like the yuan.

This is something I hadn’t considered at first: the U.S. would certainly embrace Bitcoin. It is the best backup option on the market.

What does this mean for investors?

From a practical standpoint, at Bitwise, we have already begun to see the impact of this risk reduction. Two years ago, Bitwise clients typically allocated about 1% of their portfolios to Bitcoin and other crypto assets, a proportion they wouldn’t mind losing. Given the possibility of Bitcoin being banned or facing other failures, such an allocation was reasonable. But in today’s environment, the situation is different. We more often see clients allocating 3% of their funds to Bitcoin. As more people around the world realize that the risks associated with Bitcoin have significantly decreased, I believe this proportion will rise to 5% or even higher.

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