Bitwise: Why did the market react wrong? What is the only important issue with BTC

by Matt · Hougan, Chief Investment Officer, Bitwise; Deng Tong, Golden Finance

What's really important about a strategic Bitcoin Reserve. **

**The U.S. government established a strategic bitcoin reserve last week. **

Please take a moment to reflect on these words.

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Fifteen years after the birth of Bitcoin – known as the "pet rock" and "rat poison" – the U.S. government declared Bitcoin a "strategic" asset that could not be sold.

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

But now we have to talk about how the market perceives the news.

Market reaction and the reasons for the error

Despite the historic significance of the statement, Bitcoin has fallen sharply in recent days. As I write this memo, Bitcoin has fallen 13% from Thursday's high above $92,000 to below $80,000, its lowest level since November 2024.

There are a number of reasons for the move, including heightened economic concerns and a general pullback in equities unrelated to the reserve announcement. But make no mistake: part of the reason for the callback is the announcement itself.

As this article from Barron's explains, crypto investors are upset because the government has not announced plans to buy more bitcoin immediately. Instead, it said the reserves would be capitalized by confiscated assets already owned by the federal government.

Market disappointment is ridiculous for many reasons.

First of all, simply "not selling" the government's existing assets is a major victory. **The United States currently holds approximately 200,000 bitcoins, worth approximately $16 billion. Under the previous administration, most or all of Bitcoin was planned to be sold in 2025. It is of great significance to eliminate this excess supply in the market.

Second, I think the market is vastly underestimating the likelihood that the government will actually start buying more Bitcoin in the short term. I encourage you to read the Executive Order in its entirety. Among other things, it clearly stipulates the following:

"The Secretaries of the Treasury and Commerce should develop strategies to acquire more government Bitcoin, provided that these strategies have no impact on the budget and do not impose incremental costs to U.S. taxpayers." (Emphasis added.) ）

Note that it does not say that ministers "can" or "can"; Instead, say "should". Part of my career has been writing speeches for federal officials, and I can tell you that these words are carefully chosen in official statements.

"Should" means something here, and I think the market ignores that.

But the biggest reason for the absurdity of market skepticism is that investors are simply focusing on the wrong issues. **

The only question that matters in Bitcoin

If you're a long-term investor, the only question that matters in Bitcoin is: Will Bitcoin become a global macro asset of geopolitical importance like gold? **

More countries will add Bitcoin to their strategic reserves...... Or less? There will be more sovereign wealth funds investing in Bitcoin...... Or less? It will play a greater role in the global financial markets...... Or is it smaller?

If Bitcoin does matter globally, my opinion is: it will be a $10-50 trillion asset, meaning a return of 5x to 25x over the current price. If not, it will become a footnote in history, hovering below $150,000 with only a small group of liberals, cypherpunks, and speculators backing it. **

There is no middle ground. Bitcoin is either globally important or not.

Keeping this question in mind can calm the short-term noise. Would it be nice if the government stepped in and bought 100,000 bitcoins? Of course – this could instantly increase the price by 20% from current levels. I will not object to this.

But this is not as important as whether Bitcoin will become a globally important macro asset. From this point of view, the strategic reserve is a big step forward. This is a warning from the U.S. government to the world that "Bitcoin is important." This is important for other countries – from the Czech Republic and El Salvador to China, Russia and India – who may be considering building their own strategic reserves. Do you think they would prefer to join before or after the U.S. begins to take major action?

That's why, despite the volatility and anxiety of investors today, I see a big takeaway.

This short-term weakness is a gift. **