What is the real focus of the strategic Bitcoin reserve?

Author: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: Deep Tide TechFlow

Last week, the U.S. government established a strategic reserve of Bitcoin. Let's take a moment to reflect on the weight of this statement.

Fifteen years after the birth of Bitcoin—having endured years of ridicule and skepticism, being referred to as a "pet rock" and "squared rat poison"—the U.S. government has finally defined Bitcoin as a "strategic" asset and explicitly stated that these assets "must not be sold."

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

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

Fifteen years after Bitcoin's inception—having faced over a decade of mockery and doubt, being called a "pet rock" and "squared rat poison"—the U.S. government has declared Bitcoin a "strategic" asset that "must not be sold."

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

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

Market Reaction and Its Missteps

Despite the historical significance of this announcement, Bitcoin has recently seen a sharp decline. As I write this memo, Bitcoin has dropped 13% from its peak of over $92,000 on Thursday, falling below $80,000, marking its lowest level since November 2024.

This decline has multiple causes, including heightened economic concerns and a general market pullback unrelated to the reserve announcement. But there is no doubt: part of the pullback is due to the reserve announcement itself.

As noted in this Barron's article, crypto investors felt disappointed because the government did not announce an immediate plan to purchase more Bitcoin. Instead, the government stated that the reserve would be funded by seized assets already held by the federal government.

The market's disappointment is absurd from several perspectives.

First, simply "not selling" the government's existing holdings is already a significant victory. The U.S. currently holds about 200,000 Bitcoins, valued at approximately $16 billion. During the previous administration, most or all of these Bitcoins were planned to be sold by 2025. Eliminating this potential selling pressure from the market is already important.

Second, I believe the market has severely underestimated the likelihood that the government will soon begin purchasing more Bitcoin. I suggest you read this executive order in full. It clearly states:

"The Secretary of the Treasury and the Secretary of Commerce shall develop strategies for acquiring additional government Bitcoin, provided that these strategies achieve budget neutrality (i.e., these strategies have no impact on the budget) and do not impose additional costs on U.S. taxpayers." (Emphasis added)

Note that the executive order uses "shall" rather than "may" or "can." As a former speechwriter for federal officials, I can tell you that the wording in such official statements is carefully considered.

"Shall" has a specific meaning here, and the market seems to have overlooked this.

But the most absurd aspect of the market's skepticism is that investors are not even focusing on the right question.

The Only Important Question About Bitcoin

For long-term investors, the only important question about Bitcoin is: Will Bitcoin become a globally significant macro asset with geopolitical importance, like gold?

Will more countries incorporate Bitcoin into their strategic reserves… or fewer? Will more sovereign wealth funds invest in Bitcoin… or fewer? Will its role in global financial markets grow… or shrink?

If Bitcoin indeed becomes globally significant, this is my view: it will become a $10-50 trillion asset, implying a 5-25 times return relative to current prices. If not, it will become a footnote in history, hovering below $150,000, supported only by a small group of libertarians, cypherpunks, and speculators.

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

Keeping this question in mind can help us avoid being distracted by short-term noise. Would it be great if the government purchased 100,000 Bitcoins? Of course—this could immediately push the price up 20% from current levels. I have no disagreement with that.

But that is not as important as whether Bitcoin can become a globally significant macro asset. From this perspective, the strategic reserve is a huge step forward. It is a notification from the U.S. government to the world that "Bitcoin matters." 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. Do you think they would prefer to enter the market before or after the U.S. takes significant action?

That is why, despite current investors being anxious and the market being volatile, I see only one important conclusion:

This short-term weakness is a gift.

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