Bitwise: BTC falls below $80,000 Investors should pay attention to the most important issues

Author: Matt Hougan, Chief Investment Officer of Bitwise; Deng Tong, Golden Finance

What is really important about strategic Bitcoin reserves.

The U.S. government established strategic Bitcoin reserves last week.

Please take some time to think about these words.

Fifteen years after Bitcoin was born—pets called it “pet stone” and “rat poison”—the U.S. government declared Bitcoin a “strategic” asset that cannot be sold.

This is a historic milestone that will push Bitcoin to record 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 sees this news.

Market reaction and its reasons for error

Despite the historical significance of the statement, Bitcoin has fallen sharply in recent days. At the time of writing this memorandum, Bitcoin had fallen 13% from its high above $92,000 on Thursday to below $80,000, the lowest since November 2024.

The move is of many reasons, including a growing economic concerns and a general pullback in stock markets that are not related to reserve announcements. But don't get me wrong: part of the reason for the callback is the announcement itself.

As this article in Barron's magazine explains, cryptocurrency investors are upset because the government has no plans to buy more bitcoins right away. Instead, it says the reserves will be capitalized by confiscated assets already owned by the federal government.

Market disappointment is ridiculous for many reasons.

First, simply “not selling” the existing government assets is a major victory. The United States currently holds about 200,000 bitcoins, worth about $16 billion. Under the leadership of the previous administration, most or all of Bitcoin is planned to be sold in 2025. Eliminating this excess supply in the market is of great significance.

Second, I think the market is greatly underestimating the possibility that the government will actually start buying more bitcoins in the near term. I encourage you to read the Executive Order in full. Among other things, it explicitly specifies the following:

"The Treasury Secretary and Commerce Secretary should develop strategies for obtaining more government bitcoins, provided that these strategies have no impact on the budget and do not bring incremental costs to U.S. taxpayers." (Stick supplement.)

Note that it does not say that ministers “can” or “can”; Part of my career has been writing speeches for federal officials, and I can tell you that the words in the official statement are carefully selected.

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

But the biggest reason why the market skepticism is absurd is that investors are just focusing on the wrong questions.

The only important issue in Bitcoin

If you are a long-term investor, the only important question in Bitcoin is: Will Bitcoin become a global macro asset with geopolitical importance like gold?

Will more countries add Bitcoin to their strategic reserves…or less? Will there be more sovereign wealth funds investing in Bitcoin…or less? Will it play a bigger role in global financial markets…or is it a smaller role?

If Bitcoin is indeed important globally, my opinion is: It will be an asset worth $10-50 trillion, meaning a 5-25-fold return than the current price. If not, it would be a footnote in history, hovering below $150,000, with only a small number of liberals, crypto-punks and speculators supporting it.

There is no middle ground. Bitcoin is either important or not important on a global scale.

Remember this problem can calm short-term noise. Would it be great if the government stepped in and bought 100,000 bitcoins? Of course – this could immediately raise the price by 20% from the current level. I won't object to this.

But this is not as important as whether Bitcoin will become an important global macro asset. From this perspective, strategic reserves are a big step forward. This is a warning from the US 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 – they may be considering building their own strategic reserves. Do you think they would rather join before or after the United States starts taking major actions?

That's why, despite the volatility and anxiety among investors today, I've seen a big gain.

This short-term weakness is a gift.