Central Banks across the globe may hold more Bitcoin and gold reserves than dollar reserves by 2030. The latest research by Deutsche Bank shows a potential shift in sovereign reserve strategy.
In the report named “Gold’s reign, Bitcoin’s rise: The future of central bank reserves,” released by Deutsche Bank, economists have argued that just as gold was a bedrock in the 20th century, Bitcoin could play a similar role today.
Deutsche Bank economists Marion Laboure and Camilla Siazon said that Bitcoin could become a modern pillar of financial security, similar to the role gold played in the 20th century. They explained that although Bitcoin is not backed by any physical asset, much like gold in practice, its volatility has fallen to historic lows, making it more appealing to long-term investors.
The report lists a number of important factors that are helping this change happen. To start with, it highlights how institutional demand for Bitcoin is growing. This growth occurs despite macro risks and a weakening U.S. dollar.
One recent example is that of the Grand Duchy of Luxembourg. It has become the first Eurozone nation to invest in Bitcoin through its sovereign wealth fund. Then, investors are becoming more interested in non-fiat hedges because of geopolitical tensions, rising prices, and uncertainty about monetary policy.
Last but not least, central banks may benefit from adding digital assets to diversify their holdings, particularly in times of stress on traditional reserve currencies.
This shift could significantly improve the management of reserves. For a long time, gold has been the asset of choice for governments looking for stability, liquidity, and protection from inflation. On the other hand, cryptocurrencies like Bitcoin are more volatile, have more regulatory and technological risks, and raise questions about custody and governance. Deutsche Bank, on the other hand, says that these problems don’t have to be too big for central banks with a lot of time and money.
If central banks do start using Bitcoin, there will be a number of effects. A mix of gold, government bonds, and digital assets could make reserve portfolios more diverse. It could speed up the process of making rules and building infrastructure for central banks to hold crypto.
Market updates
Both Bitcoin and gold have high market values, making them attractive safe-haven assets for central banks amid economic uncertainty. At the time of writing, Bitcoin (BTC) is priced at $121,679, down 0.31% in 24 hours, as per data by CoinMarketCap.
In contrast, gold is trading at $3,991.10 per ounce, as per data by APMEX. These figures highlight why central banks may increasingly consider both assets for reserve diversification, using them to hedge against currency risks and market volatility.