Bitwise CIO Warns of Fiat Currency Risks, Citing Wallace Parable

Key Insights:

• Bitwise CIO says fiat money is losing trust.
• Central banks buy record gold amid debt fears.
• Bitcoin ETFs outpace gold with $45B inflows.
• Traditional portfolios remain exposed to fiat risk.

Bitwise Asset Management Chief Investment Officer Matt Hougan published an investor memo on June 17, 2025 that questioned the foundations of fiat money.

He began by recalling David Foster Wallace’s famous 2005 parable about two fish in water – one asks “What the hell is water?” – to suggest modern investors are blind to the fiat system around them.

Hougan noted that nearly everyone working in finance today has only known a “fiat-based world” (fiat money since the U.S. left the gold standard in 1971). He argued this “money-printing” experiment should be re-examined, asking why fiat should be taken for granted.

Bitwise CIO Talks About Gold Resurgence and Central Bank Buying

According to Hougan, mainstream media have begun sounding alarms about fiat. He cites a Financial Times Big Read (June 2025) reporting that gold – once deemed obsolete – has “made a roaring comeback” and “once more become an anchor” in today’s uncertain world.

Data show central banks quietly shifted from decades of selling bullion to record buying in recent years. In fact, net official gold purchases surged after the 2008 financial crisis and again after 2020, when inflation fears and geopolitical shocks (like the 2022 Ukraine war) spurred banks to hedge currency risk.

Last year, official gold holdings even overtook the euro to become the world’s second-largest reserve asset (behind only the U.S. dollar). With the U.S. national debt approaching $37 trillion, Hougan notes central banks want reserves that are:

• Scarce – limited in supply,
• Global – accepted worldwide,
• Hard to Manipulate – not subject to easy debasement, and
• Self-Sovereign – able to be held outside any government’s control.

These traits fit gold – and, increasingly, they fit bitcoin too, Hougan argues.

Bitcoin ETFs Surge vs. Gold ETFs

Outside of government, retail and institutional flows have indeed favored Bitcoin. Hougan points out that since the launch of U.S. spot Bitcoin ETFs in January 2024, roughly $45 billion has flowed into Bitcoin funds, compared to about $34 billion into gold ETFs over the same period.

By contrast, in early 2024 Reuters noted two new U.S. Bitcoin ETFs gathered about $9.6 billion in just a few weeks, even as some gold funds saw outflows.

Bitcoin’s total market value is roughly $2 trillion, still relatively small for central bank investors, but demand from governments and institutions is rising.

As one analyst quoted by Reuters observed, Bitcoin’s rally has led some to view it as a “digital alternative to gold.” A potential new hedge against “global disorder and financial system dysfunction”. In fact, bitcoin’s price jumped about 150% in 2023, far outpacing gold’s 13% rise.

Whether via metal or crypto, the takeaway is the same. Hougan says,

a traditional 60/40 portfolio of stocks and bonds is still 100% exposed to fiat currency risk.

In his words, investors trained on “how to diversify” may find out that any such portfolio is “still 100% exposed to fiat”. He warned that many are waking up to this fact: “People are realizing that those are rather risky waters to be swimming in”.

Other market commentators have also raised concerns about fiat currency. Robert Kiyosaki, author of Rich Dad Poor Dad, has repeatedly criticized centralized monetary policy, calling fiat “fake money” and advocating for assets like Bitcoin, gold, and silver.

In a May 10 post on X, he condemned the U.S. Federal Reserve and cited former Congressman Ron Paul to support his stance. On May 23, Global Macro Investor founder Raoul Pal warned that fiat savings are rapidly eroding in value, urging investors to consider crypto and NFTs as inflation hedges while prices remain relatively low.

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