Post
Topic
Board Economics
Re: Is Bitcoin the best reserve asset?
by
Upgrade00
on 03/11/2020, 11:11:32 UTC
Bitcoin is too unstable to be used as reserve asset
This would depend on what metric you're looking at; Bitcoin's supply is the most stable of all the other asset classes which are used as reserve currencies, it is immune to supply shocks and fiscal policies are not implemented to adjust to changes in economics conditions. The protocol of Bitcoin would likely be the same 10 or 50 years from now.

You're are probably analysing volatility in the market price, Bitcoin is highly speculative with regular price fluctuations, but it is a decade old currency with lots of time to adapt and evolve to suit various markets. This volatility does not make it very suitable as a reserve asset now especially if the company is looking for stability; so those companies adopting it now are probably being forward thinking to get ahead of the curve (the value is generally appreciating, so in a couple of years it would likely be higher than it is now when compared with fiat or gold).

Also, you cannot only focus on one quality and use that to qualify an asset. Bitcoin has other unique attributes that makes it stand out and which are useful in a reserve currency.