Bitcoin’s Giant Leap into the Reserve Asset Category
“The way to make money is to buy when blood is running in the streets”
J.D.Rockefeller
How true it is in these modern times, with war between Russia and Ukraine disrupting worldwide peace and financial reserves. Today, we discuss how valued currencies face crucial financial impacts from market volatility.
Reserve assets are financial assets, such as gold and currencies, that can be readily transferable and are used to balance international transactions and payments. They must be readily available, physical, controlled by policymakers, and easily transferable.
The U.S. dollar (USD) is widely considered to be the predominant reserve asset, and, because of this, most global central banks will hold a substantial amount of USD. roughly 59 percent of all foreign bank reserves are currently held in US Dollar.
Switzerland’s reserve assets are highly diversified, comprising of foreign currency reserves both in cash and securities, gold bullion, deposits at foreign central banks, deposits at Swiss and foreign commercial banks, special drawing rights, deposits with the International Monetary Fund (IMF) and derivatives. The Swiss global investment bank and Credit Suisse, a leading financial advisory services company, predict an imminent and radical change to the world’s monetary system. Bitcoin Will Benefit from the New Monetary World Order. The rise and fall of assets depend on inflation, weakening purchasing power and international competition.
So, are we looking at a new powerful reserve currency? We most likely could be. Bitcoin has a supply cap of 21 million coins, can be transferred globally and is not controlled by any single party or nation-state. This has led some to believe that it will operate like “digital gold”, or other safe-haven assets in times of crisis as it matures. Bitcoin is a decentralised system of storing transactional data. Data storage is done on blocks on a public ledger/database. This means that there is no centralised authority controlling the changes and actions happening in the database. The limit of bitcoins was set at 21 million tokens. A limited supply makes bitcoin a scarce asset and an excellent hedge against inflation.
Instead, the transactional data in the bitcoin blockchain is verified by a network of peers who all hold a copy of the database/ledger. Any changes or actions in the database must be verified and approved by all the nodes in the network. This makes the bitcoin blockchain structure secure and immutable. Bitcoin as a reserve asset will remove the element of third parties controlling the structure, essentially removing their influence on the currency itself. Bitcoin provides a better level of anonymity than fiat currencies.
So, to all the cryptocurrency holders, it could be good news for you! Stay with us for more revenue finance and fund related news. Do subscribe to Channel I’M coz we bring you the best of the latest!
