Bitcoins
- Crypto index fund management firm Bitwise’s chief investment officer, Matt Hougan, said he believes now is the “best time in history” to invest in Bitcoin, on a risk-adjusted basis.
- Hougan said that while early investors in Bitcoin saw bigger returns than people investing now are likely to see, they also had to take huge risks.
- He argues that all the major risks have now been addressed — including the risk the US could ban Bitcoin — but there’s still the potential for very large gains.
According to Matt Hougan, chief investment officer (CIO) at crypto-focussed asset management firm Bitwise, there’s never been a better time to invest in Bitcoin (BTC)…on a risk-adjust basis, that is.
You may be thinking, “But Matt, buying Bitcoin in 2010 seems like it would’ve been a better time.” In his article, published March 25, Hougan explained why he believes now is a better time to buy — and it all comes down to risk.
In its earliest days, bitcoin was a little like a lottery ticket: huge upside, but equally huge risks.
Matt Hougan, Bitwise CIO
Hougan argued that while early Bitcoin investors saw bigger gains than those investing today are likely to see, they were also exposed to much larger risks. The Bitwise CIO said that with the rise of reliable exchanges and advances like the launch of Bitcoin ETFs and Trump’s executive order to establish a strategic Bitcoin reserve, all the major risks associated with investing in Bitcoin have been addressed.
I believe that today—right now—marks the single best moment in history to buy bitcoin on a risk-adjusted basis.
Matt Hougan, Bitwise CIO
Related: GameStop Adopts Bitcoin as Treasury Reserve, Shares Surge on Cryptocurrency Strategy
Early Adopters of Bitcoin Took Big Risks
Hougan shared the story of when he personally missed his chance to buy Bitcoin back in 2011: after being told about Bitcoin’s potential by a colleague he decided to go grab a coffee instead of immediately buying US$1000 worth of Bitcoin. Had he invested then, his US$1000 would now be worth around US$88 million.
Hougan points out, though, that Bitcoin was still very much in its infancy in those days and investors had to deal with all kinds of questionable websites and shady characters to get their hands on some Bitcoin. He referred to the fact that a leading crypto exchange at the time — New Liberty Financial — handled exchanges through Paypal via a gmail address and described its service as a “personal hobby”.
Disclaimer from New Liberty Standard website from 2010. Source: Wayback machine
In hindsight, it’s easy to say I should have bought $1,000 of bitcoin. But at the time, that meant sending $1,000 to a random PayPal address. Throw in custody, regulatory, technological, and governmental risks … and putting $1,000 on bitcoin in 2011 was a massive gamble.
Matt Hougan, Bitwise CIO
As Bitcoin Has Matured, Risks Have Decreased Significantly
As Bitcoin matured as a technology the risks associated with investing in it have dropped substantially, massively improving the risk versus reward calculation, according to Hougan.
Hougan said most serious risks associated with Bitcoin have been addressed over the years, including the emergence of safe exchanges for trading crypto and secure custody solutions for holding it. He also alludes to “legitimate concerns” about criminal activity regulation, and mining concentration, but claims that bitcoin has overcome every one of these “existential risks”.
When Bitcoin ETFs emerged in early 2024, Hougan said that addressed another major risk by providing regulatory clarity to institutional investors. However, one major risk remained: the risk that the US government would ban Bitcoin.
That risk essentially evaporated earlier this month, according to Hougan, when Trump signed the executive order establishing a strategic Bitcoin reserve in the US. Hougan said Trump has signalled the US government now sees Bitcoin not so much as a rival to the US dollar’s status as the global reserve currency, but instead as the “best backup plan on the market” should anything go seriously wrong with the fiat system:
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.
Matt Hougan, Bitwise CIO
Related: Michael Saylor Advocates for Massive US Bitcoin Buy: Proposes 25% Stake by 2035
Since the signing of the executive order, Hougan said Bitwise has already seen investors recognising this ‘derisking’ of Bitcoin and increasing the size of their holdings accordingly, with many increasing their Bitcoin allocations from the 1% range to 3%. Hougan believes this trend is set to continue, anticipating allocations of 5% or higher as more investors understand where Bitcoin is heading in the future.
“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,” he said.
Jody McDonald Read More