In a compelling new investor memo titled “The Great Derisking of Bitcoin,” Bitwise Asset Management has made a bold declaration: the risk-adjusted opportunity to invest in Bitcoin has never been stronger. Chief Investment Officer Matt Hougan asserts in his March 25, 2025 dispatch, “Now is the best time in history to purchase bitcoin (on a risk-adjusted basis).” The analysis traces Bitcoin’s evolution from a fringe experiment to a maturing digital asset, arguing that its foundational risks have been systematically dismantled—making today a pivotal moment for strategic entry.
The Evolution of Bitcoin’s Risk Profile
Hougan begins by reflecting on his first encounter with Bitcoin in February 2011 while working at ETF.com. During a routine market review, a junior analyst pointed out that Bitcoin had just crossed $1. At the time, the idea of digital scarcity and decentralized money seemed more like science fiction than financial reality.
Looking back, Hougan notes that a $1,000 investment then would now be worth approximately **$88 million**. But he’s quick to emphasize: hindsight is 20/20. In 2011, investing in Bitcoin wasn’t just speculative—it was fraught with tangible dangers.
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“Throw in custody, regulatory, technological, and governmental risks … and putting $1,000 on bitcoin in 2011 was a massive gamble,” Hougan explains. There were no trusted exchanges, no secure wallets, and certainly no regulatory clarity. Sending funds meant trusting anonymous platforms with no legal recourse—a far cry from today’s infrastructure.
How Bitcoin Overcame Its Existential Threats
Bitcoin’s journey has been defined by resilience. Early digital cash experiments, such as the NSA’s 1997 paper “How To Make A Mint: The Cryptography of Anonymous Electronic Cash,” failed to gain traction. There was no guarantee Bitcoin would succeed either.
But over time, key developments reduced its vulnerabilities:
- Secure trading platforms like Coinbase (launched in 2011) provided safe on-ramps for retail and institutional investors.
- Professional custodianship emerged with financial heavyweights like Fidelity entering the space, offering insured storage and compliance frameworks.
- Spot Bitcoin ETFs, approved in the U.S. in 2024, brought crypto into the mainstream investment ecosystem, allowing exposure through regulated, transparent vehicles.
Each milestone chipped away at Bitcoin’s reputation as a volatile, unregulated gamble. Instead, it began to resemble a legitimate asset class—scarcely supplied, digitally verifiable, and increasingly integrated into traditional finance.
The Final Risk: Government Crackdown
For years, one question loomed over Bitcoin: What if a major government bans it? This fear wasn’t unfounded. In 1933, President Franklin D. Roosevelt issued Executive Order 6102, confiscating private gold holdings to stabilize the U.S. monetary system. Many investors feared a similar fate for Bitcoin if it ever threatened the dollar’s dominance.
Hougan acknowledges the concern:
“The US famously confiscated private gold holdings in 1933 to boost public coffers. Why would it allow bitcoin to grow large enough to threaten the US dollar?”
Yet, he argues that a recent development has fundamentally altered this equation.
The Game-Changer: U.S. Strategic Bitcoin Reserve
In early March 2025, President Trump signed an executive order establishing a U.S. Strategic Bitcoin Reserve—a move Hougan describes as transformative. By officially acquiring Bitcoin, the federal government signaled not just tolerance, but strategic endorsement.
“This wasn’t just regulatory clarity—it was active participation,” Hougan writes. “And just like that, the last existential risk facing bitcoin disappeared before my eyes.”
The implications are profound. A government that invests in an asset is unlikely to ban it. Instead of viewing Bitcoin as a threat, the U.S. appears to be treating it as a hedge against geopolitical monetary shifts—particularly the rising influence of currencies like the Chinese yuan.
Quoting Cliff Asness of AQR Capital, Hougan addresses the paradox:
“(I)f crypto is a viable long-term competitor to the US dollar, why on earth would we be promoting this direct competitor?”
His answer? The U.S. isn’t surrendering monetary leadership—it’s preparing for contingencies.
“The best-case scenario for the US 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.”
Bitcoin, in this view, isn’t replacing the dollar—it’s serving as a transparent, neutral fallback in an uncertain financial future.
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Institutional Adoption Is Accelerating
The shift isn’t just theoretical—it’s reflected in real-world portfolio allocations.
Just two years ago, allocating 1% of a portfolio to Bitcoin was considered aggressive. Today, many institutional investors are moving toward 3% allocations, with some eyeing 5% or more.
Why? Because Bitcoin is no longer seen as pure speculation. It’s increasingly viewed as a digital store of value, akin to gold—but with superior portability, divisibility, and verifiability.
Hougan forecasts that as awareness of Bitcoin’s derisking spreads, these allocations will continue to climb:
“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.”
This trend is supported by growing infrastructure: regulated ETFs, insured custody solutions, and clearer tax and accounting guidelines all contribute to lower perceived risk.
Frequently Asked Questions
Q: Why is now considered the best time to buy Bitcoin?
A: According to Bitwise CIO Matt Hougan, Bitcoin has overcome nearly all major existential risks—technological failure, regulatory bans, custody issues—while gaining institutional and governmental legitimacy. This combination makes its current risk-reward profile historically favorable.
Q: What changed with the U.S. Strategic Bitcoin Reserve?
A: The establishment of a national Bitcoin reserve signals that the U.S. government sees Bitcoin as a strategic asset rather than a threat. This drastically reduces the likelihood of future bans and enhances long-term confidence in its legal status.
Q: How does Bitcoin compare to gold as a store of value?
A: Both are scarce and decentralized, but Bitcoin offers advantages in transfer speed, divisibility (down to satoshis), and verifiable supply. Unlike gold, Bitcoin can be moved across borders instantly without intermediaries.
Q: Are spot Bitcoin ETFs important for investors?
A: Yes. They allow exposure to Bitcoin through traditional brokerage accounts with regulatory oversight, eliminating the need for self-custody and reducing complexity for mainstream investors.
Q: Could other governments ban Bitcoin?
A: While possible in isolated cases, global adoption—especially by major economies—makes widespread bans unlikely. Network effects and financial incentives now favor integration over suppression.
Q: What should my portfolio allocation to Bitcoin be?
A: There’s no one-size-fits-all answer. Institutional norms are shifting from 1% to 3%+ allocations. Investors should consider their risk tolerance, time horizon, and belief in digital scarcity when deciding.
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Conclusion
Bitcoin’s journey from $1 curiosity to $87,865 (as of press time) reflects more than price appreciation—it reflects risk reduction. What was once a speculative bet on unproven technology is now a globally recognized asset backed by improving infrastructure, regulatory clarity, and even national strategy.
Bitwise’s thesis is clear: the era of extreme uncertainty is over. The remaining risks are market-driven—volatility, macroeconomic shifts—not existential. For investors focused on long-term value preservation and growth, the calculus has changed.
Now may not just be a good time to buy Bitcoin—it may be the best time in history to do so on a risk-adjusted basis.
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