Bitwise Chief Investment Officer Matt Hougan said that President Trump's recent signing of an executive order to establish a Strategic Bitcoin Reserve in the U.S. has removed the "last existential risk" for an asset that now represents 1.3% of the estimated $128 trillion global money supply.

In a note to clients late Tuesday, Hougan harkened back to his first encounter with bitcoin in 2011, when it crossed the $1 mark, sparking a discussion among his former colleagues. Had he invested $1,000 then, it would be worth $88 million today, but at the time, bitcoin was a risky investment due to custody, regulatory and technological challenges, he said. However, Hougan believes today presents the "best time in history to purchase bitcoin" on a risk-adjusted basis.

In its early days, bitcoin was like a lottery ticket, the Bitwise CIO explained — huge potential rewards but equally huge risks. The technology was unproven, trading platforms were unreliable at best and there were significant concerns about money laundering and regulation. Over time, bitcoin overcame many of these existential threats with the launch of Coinbase in late 2011 and institutional custodianship from blue-chip companies like Fidelity. The introduction of spot Bitcoin ETFs last year also provided regulatory clarity for U.S. institutional investors looking to access the space. However, the final boss — the fear of government bans — still lingered, Hougan said.

The question that Hougan continued to ponder was that the U.S. government famously confiscated private gold holdings in 1933 to boost public coffers, so why would it allow bitcoin to grow large enough to threaten the U.S. dollar?

Then, on March 6, President Trump signed an executive order to create a U.S. Strategic Bitcoin Reserve, established from the approximate 200,000 BTC ($17.6 billion) already owned by the federal government that was forfeited as part of criminal or civil proceedings, minus those that still need to be returned to victims of crime. The bitcoin reserve is expected to hold approximately 103,500 BTC at its launch, with 94,636 BTC seized from the Bitfinex hackers likely to be returned to the crypto exchange. 

Additionally, Trump directed Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to develop budget-neutral strategies for acquiring additional bitcoin, provided they have no incremental costs to American taxpayers. Potential budget-neutral strategies include U.S. Treasury Exchange Stabilization Fund surpluses, selling special drawing rights issued by the IMF or a gold certificate revaluation.

"And just like that, the last existential risk facing bitcoin disappeared before my eyes," the Bitwise CIO said. While many questioned why the U.S. would do this, Hougan's answer is that bitcoin is better than the alternative. "The best-case scenario for the U.S. is that the dollar remains the world's reserve currency. But if we get to the point where that's at risk, we're better off moving to bitcoin than something like the Chinese yuan," he said. "This is what I couldn't see originally: Of course, the U.S. would embrace bitcoin. It's the best backup plan on the market."

Anecdotally, Bitwise is starting to see the impact of this derisking, with more clients increasing their bitcoin and crypto allocations from a common 1% two years ago to around 3% today, Hougan noted. "As more of the world wakes up to the massive derisking we've seen in bitcoin, I think you'll see this number rise to 5% and beyond."

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