Bitcoin As National Reserve Asset: Key Insights From Forbes On Central Banks Interest
25 Outubro 2024 - 7:30PM
NEWSBTC
A recent report published by the Bitcoin Policy Institute (BPI) and
highlighted by Forbes explores the growing discussion around
Bitcoin as a viable reserve asset for central banks. Authored
by Dr. Matthew Ferranti, a Harvard-trained economist and former
member of the White House Council of Economic Advisers, presents
several compelling arguments for why central banks might consider
adding Bitcoin to their portfolios. Bitcoin As A Modern Reserve
Asset Dr. Ferranti begins by noting the trend of central
banks increasing their gold reserves, suggesting that Bitcoin could
serve as a modern counterpart. While only one central
bank—the Central Bank of El Salvador—has publicly disclosed Bitcoin
holdings, Dr. Ferranti highlights that Bitcoin represents just
under 10% of El Salvador’s reserves. He argues that an optimal
allocation would fall between 2% and 5%, allowing for
diversification without excessive risk. Related Reading: Tether
Defends Its Record, Blasts WSJ For ‘Irresponsible Reporting’ One of
the key points raised in the report is Bitcoin’s historical
performance during economic crises. Dr. Ferranti argues that a
crucial feature of any reserve asset is its ability to provide
returns when traditional assets falter. The report cites
examples such as the financial turmoil surrounding the collapse of
Silicon Valley Bank in 2023 and the US sanctions on Russia
following its invasion of Ukraine in 2022, both of which
corresponded with significant spikes in Bitcoin’s value. Despite
Bitcoin’s short-term volatility, Dr. Ferranti posits that it has
the potential to outperform traditional assets over longer periods.
He attributes this to Bitcoin’s Halving cycle, which reduces the
rate of new coin production and can lead to price increases.
Furthermore, the economist notes that both Bitcoin and gold perform
well during inflationary periods, suggesting that rising Bitcoin
prices might indicate forthcoming inflation. No Default Risk And
Immunity To Financial Sanctions The report also references findings
from the Federal Reserve Bank of New York, which indicate that
Bitcoin’s price is largely unaffected by macroeconomic news, except
for inflation-related information. This quality, the doctor
says, makes Bitcoin an effective diversifier within a portfolio,
especially given its low correlation with traditional reserve
assets such as gold and foreign currencies. Dr. Ferranti outlines
three reasons why Bitcoin is devoid of default risk. First, the
doctor contends that it does not represent a claim on future cash
flows, unlike stocks and bonds. Second, the network is
secured through a robust mining process. Lastly, Bitcoin is immune
to financial sanctions—an important consideration for central
banks—since it cannot be “frozen” in the same way traditional
assets can be. Related Reading: Crypto Analyst Says Ethereum Will
Outperform Bitcoin And Solana, Is $12,000 Possible? While
acknowledging that Bitcoin does not match the liquidity of the US
Treasury market, Dr. Ferranti points out that its liquidity has
improved significantly, with a current market cap exceeding $1.3
trillion. The economist concludes by suggesting that this
level of liquidity is adequate for accommodating large
transactions, making Bitcoin a more attractive option than in
previous years for central banks worldwide. At the time of writing,
the largest cryptocurrency on the market is trading at $67,500,
down 1.5% in the 24-hour time frame. Featured image from
DALL-E, chart from TradingView.com
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