Quote from: Joeboy on August 31, 2025, 03:48:01 PM

I reecently created a topic on my local board titled “Can Bitcoin Ever Match or Replace Gold as the Ultimate Reserve Asset?” (https://bitcointalk.org/index.php?topic=5557450.msg65751745#msg65751745). In that post, I talked about Bitcoin’s potential of one day standing side by side with gold as a reserve asset, But while the angle of my previous post looked at Bitcoin's possibilities, I also think it’s important that we look at the other side of the coin which is "the economic risks nations could face if they integrate Bitcoin into their official reserves."

Now when talkinng about about reserves, the first thing that should pop up in our minds is "stability." That’s why governments keep gold, and foreign currencies like dollars, and other assets that don’t easily swing in price. Now if a nation decides to bring Bitcoin as a national reserve it would immediately face some set of problems. One of which is "volatility," coz Bitcoin’s price tends to swing from time to time. Now Imagine government want to pay for foodstuff imports or maybe repay international loans, only to find that Bitcoin has dropped in price... That kind of shock could further bring about further crisis instead of solving one.

We also have the issue of "Liquidity" Indeed Bitcoin is a liquid asset, but I don't think that it is deep enough to support a government moving billions in and out without shaking the market. This is because that kind of government sized transaction could shake the market. In addition, Bitcoin is greatly influenced by global sentiment and series of of events that goes beyond the control of just a particular nation, which makes Bitcoin less predictable when compared to traditional reserves.

So therefore, integrating Bitcoin into a Nation's official reserves may be very difficult coz the risks of doing so could outweigh the benefits if not properly handled. Whaat do we think about this?

Your summary seems to be missing a critical point - the volatility of crypto like Bitcoin is driven because there are a finite amount of bitcoins and a portion of those are being traded around by speculators. The more hedge funds, pension plans and central banks that buy these assets to store them indefinitely, the lower the volatility. That is why we are seeing less wild swings compared to the past, as it marches gradually upwards the corrections are reducing. Sure, it might suffer if there is a recession in the major economies of the world but that is often true for stocks and other assets. Central banks should just make sure they keep proportion and don't go too heavy on any particular type of asset.