Bitwise Chief Investment Officer Matt Hougan addressed concerns over Bitcoin’s recent price decline, emphasizing that the cryptocurrency’s long-term value lies in the “service” it provides rather than short-term price fluctuations.
Bitcoin has dropped approximately 27.5% from its record high near $126,000 on Oct. 6, briefly falling below $90,000 this week, according to The Block’s BTC price data. Despite this pullback, Hougan expressed confidence in Bitcoin’s sustained demand and utility in a memo to clients on Tuesday.
Bitcoin’s Value Rooted in Digital Wealth Storage
Hougan began client discussions by questioning why Bitcoin holds value at all, noting that it generates no profits, cash flow, or dividends and lacks physical form. He explained that the key to understanding Bitcoin’s worth is to view it not as a physical asset but as a digital wealth storage service.
“Bitcoin’s service is the ability to store wealth digitally without reliance on governments, banks, or third parties,” Hougan said. He compared its value proposition to companies like Microsoft, whose stock price reflects demand for its services.
“The more people wanting Bitcoin’s service, the higher its value; if demand falls, so does the value; if no one wants it, the value drops to zero,” Hougan wrote. However, unlike Microsoft, Bitcoin’s service cannot be subscribed to or rented—acquiring the asset is required to access the service.
Institutional Demand Supports Long-Term Outlook
Hougan highlighted Bitcoin’s approximate 28,000% price increase over the past decade as evidence of growing demand for its service. He noted that a broad range of institutional investors—including Harvard’s endowment, the Abu Dhabi sovereign wealth fund, notable figures like Ray Dalio and Stan Druckenmiller, state pension funds, and millions of retail holders—seek exposure to Bitcoin.
He further stated, “In our increasingly digital age, with governments accumulating rising debt, I expect demand for Bitcoin’s service to grow in the future.”
