As the global economy becomes increasingly uncertain, central banks are exploring new options for diversifying their reserves. One proposal gaining traction is the inclusion of bitcoin in reserve portfolios, a move that would see major economies follow China's lead in recognizing the risks of excessive reliance on the US dollar.
The idea is not without its challenges. For one, widespread adoption could undermine governments' ability to collect taxes, an issue that policymakers will eventually have to confront. Nevertheless, proponents argue that bitcoin's potential as a neutral reserve asset makes it an attractive option for central banks seeking to strengthen their portfolios and build resilience against US financial sanctions.
Bitcoin's appeal lies in its decentralized nature, which makes it impervious to the kind of currency manipulation that has long plagued traditional fiat currencies. Additionally, its algorithmically capped supply ensures that there will only ever be 21 million coins in circulation, a feature that could help to stabilize its value over time.
While some analysts warn that bitcoin's current valuation is purely speculative, others argue that it has significant potential for growth. A recent report suggests that if bitcoin were to capture just one-quarter of the global underground economy – estimated to be worth over $20 trillion – it could justify a market cap of over $1 trillion.
The Trump administration's support for cryptocurrencies and the US dollar's dominance have sparked concerns among central banks. Some are urging them to experiment with diversifying their reserves, but others warn that this could have unintended consequences. In the end, the 'new gold' may simply be gold – or something entirely different.