Is Bitcoin the best reserve asset?

[Coyster]

MicroStrategy, Grayscale, square etc, it was a year when companies chose Bitcoin as their reserve asset, if you missed some of the big news, see Fillippone's thread Bitcoin treasuries to keep track of it. That being said I found a good article that seemed to suggest that Bitcoin is the best reserve asset we've got, mind you that I'm not agreeing 100% with the writer, but many of his claims seems to be true, so why not allow the community have their say on this, see this excerpt:

An excellent way to evaluate any investment is to take $100 million and move it forward a hundred years and ask the question what happens. If I had $100 million worth of currency in any of the largest cities of the world in the year 1900, and I went forward for 100 years, and I put the money into the best bank in the city, I have two types of risks; counterparty risks and inflation risk. Regarding counterparty risk, every major bank in every major city around the world failed in 100 years. And that is a 90% probability you lose everything

I personally consider this excerpt the best part of the article and something we all can apply as we make investment plans for the future, but that's Bitcoin v Fiat/traditional institutions on the subject, and I agree that fiat is vulnerable to inflation/devaluation and manipulation and Bitcoin is prolly a much better reserve asset than just leaving your funds lying in your bank account losing its value with every year. Since Bitcoin is a good hedge, it's the better option imo. But what about Bitcoin v Gold or Bitcoin v real estate investment etc, the article has something to say about that, see:

Even gold and other precious metals run into issues when you look at them in terms of 100 years. While they appreciate over time, the logistics of holding them can be stressful. You could use third-party storage services such as commercial banks, but history has taught us that gold can get lost even there, especially during wartime or political upheavals such as revolutions. This has also happened several times in the last century. During World War II, large masses of gold were stolen by both state and non-state actors. Similarly, during the Soviet revolution, a lot of privately owned gold was seized by the incoming government

Do you think Bitcoin is the best reserve asset we have atm? Much better than Gold and others, and can we continually trust Bitcoins value to keep appreciating with the years.

The article: https://cointelegraph.com/news/bitcoin-is-the-best-treasury-reserve-asset-humanity-s-ever-had (it's much better you read the article first before commenting)

[1714115433]

1714115433

[jackg]

Nevertheless, the potential demand is still huge. As mentioned in a recent report by Fidelity, the alternative investment market grew to $13.4 trillion by the end of 2018, and very little of it was in Bitcoin. It might take converting as little as 5% of that to see the Bitcoin price moon.

I'm a bit surprised they went with that as less than 1% of those funds on their own would make bitcoin double in market cap (assuming 1/2 of current holders keep holding).


The most volatile part of cryptocurrency remains the miners though. If a large amount of mining power is controlled in China and is suddenly given a possession order by the Chinese government then the network would at least have to temporarily adjust to blacklisting those miners..

Other than that, it's possible to carry enough to sign a transaction in your own memory or on a discreet piece if paper hidden somewhere.

[Silberman]

Obviously I trust in bitcoin however we cannot minimize the risks we are incurring by holding bitcoin, lets take some of the questions you ask as an example, will bitcoin still exist 100 years in the future? I think the answer to that is yes, but will it retain its value or even increase it after 100 years? This is something I do not know, what if during the next decades a new coin that is many times better than bitcoin appears and that is the coin that gets widely adopted by the world and not bitcoin?

And just as gold can be lost bitcoin can be lost just as easily, there are many horror stories about lost and broken hard drives, people that lost the piece of paper were they wrote their seed words or their paper wallets, all in all bitcoin is a great way to store your money but it is still subject to many of the same issues.

[blockman]

Someone who's going to answer it will answer depending on his bias. A bitcoin investor will answer it's the best asset, a realtor and real estate investor will say that it's the best asset and the rest with gold and other investment instruments. IMO, it's best to have at least 2-3 of those investments and you should include bitcoin as part of your diversified investments. As for the comparison of bank deposits and bitcoin, clearly, we have the winner between the two. Money in the bank for years will have lesser purchasing value if you just deposit it. But if you put it as an investment, you only gain a very low interest annually. Whilst in bitcoin, despite the risk that you'll take and it's quite high, it's very rewarding.

[teosanru]

MicroStrategy, Grayscale, square etc, it was a year when companies chose Bitcoin as their reserve asset, if you missed some of the big news, see Fillippone's thread Bitcoin treasuries to keep track of it. That being said I found a good article that seemed to suggest that Bitcoin is the best reserve asset we've got, mind you that I'm not agreeing 100% with the writer, but many of his claims seems to be true, so why not allow the community have their say on this, see this excerpt:

An excellent way to evaluate any investment is to take $100 million and move it forward a hundred years and ask the question what happens. If I had $100 million worth of currency in any of the largest cities of the world in the year 1900, and I went forward for 100 years, and I put the money into the best bank in the city, I have two types of risks; counterparty risks and inflation risk. Regarding counterparty risk, every major bank in every major city around the world failed in 100 years. And that is a 90% probability you lose everything

I personally consider this excerpt the best part of the article and something we all can apply as we make investment plans for the future, but that's Bitcoin v Fiat/traditional institutions on the subject, and I agree that fiat is vulnerable to inflation/devaluation and manipulation and Bitcoin is prolly a much better reserve asset than just leaving your funds lying in your bank account losing its value with every year. Since Bitcoin is a good hedge, it's the better option imo. But what about Bitcoin v Gold or Bitcoin v real estate investment etc, the article has something to say about that, see:

Even gold and other precious metals run into issues when you look at them in terms of 100 years. While they appreciate over time, the logistics of holding them can be stressful. You could use third-party storage services such as commercial banks, but history has taught us that gold can get lost even there, especially during wartime or political upheavals such as revolutions. This has also happened several times in the last century. During World War II, large masses of gold were stolen by both state and non-state actors. Similarly, during the Soviet revolution, a lot of privately owned gold was seized by the incoming government

Do you think Bitcoin is the best reserve asset we have atm? Much better than Gold and others, and can we continually trust Bitcoins value to keep appreciating with the years.

The article: https://cointelegraph.com/news/bitcoin-is-the-best-treasury-reserve-asset-humanity-s-ever-had (it's much better you read the article first before commenting)

This is a big question actually. And I think this is what is stopping big companies to dive into Bitcoin. Companies generally look into utilites and cash flows of the asset they are buying and investing. Now when a company decides to buy cryptocurrency it's actually making a pretty ironic choice. Not because cryptocurrencies is a bad asset. But making it as your reserve asset is against the very utility of Bitcoin. If everyone starts using Bitcoin as an asset then it's nothing but just peanuts.
 
For example if there is a metal say "X"(Bitcoin) and it's used in certain process and is the only metal that can be used in the process(transaction) and this is the only use of this metal X.
Now this metal is scarce so a lot of people begin to hoard the complete supply of X. Now as the whole supply has been hoarded. The processors (people doing transactions in BTC) the would either use some other metal than this high value metal or maybe the group of Hoarders will release supply slowly to ensure price remains high. Now this market scenario is completely manipulative so at the end the users will try to find some alternatives.

This is the reason I think most of the companies would refrain from investing in Bitcoin as reserve currency.

[avikz]

It all depends on when you enter the market! I know a lot of corporates recently purchased thousands of bitcoins to keep  as reserve but the risk is also huge! Now for a cash rich company who are onverting 5% - 10% of their cash reserves to bitcoin, are not exposing completely to that risk. The amount is huge but as per percentage, it's manageable!

Right now the price of bitcoin is increasing steadily, but there's no guarantee that it won't go down in coming months. So whatever looks brighter at this moment, may turn dull in future. So it is really subjective to conclude whether bitcoin is the best reserve asset or not!

[ReiMomo]

We can't conclude that bitcoin will be the best nor the absolute reserve asset for like what you mentioned things change differently in time. We can't assume what will bitcoin be in the future as early as now though, bitcoins show good characteristics as an investment. But that will not be a guarantee since countries like China are aiming to create their own centralized digital currency which other countries around that globe are doing the same and as of the moment, they are not considering bitcoin as the best one that can resolve most of the issues we are experiencing in fiat.

Moreover, looking at bitcoin as the best reserve asset can also be true if any country like US will adopt it legally as their own currency.

[The Sceptical Chymist]

An excellent way to evaluate any investment is to take $100 million and move it forward a hundred years and ask the question what happens. If I had $100 million worth of currency in any of the largest cities of the world in the year 1900, and I went forward for 100 years, and I put the money into the best bank in the city, I have two types of risks; counterparty risks and inflation risk. Regarding counterparty risk, every major bank in every major city around the world failed in 100 years. And that is a 90% probability you lose everything

Whah??  Yeah, that's an excellent way to look back 100 years to see what would have been the best investment had you been able to see the future 100 years ago, but we all know that isn't possible.  And it's not possible today. 

Time will tell whether Microstrategy and the other corporations that bought tons of bitcoin were wise in doing so, or foolish.  There's no way to know that right now.  I think it's super-risky on their part to use bitcoin as their reserve currency.  Things might be going very well for bitcoin right now, but if you've been into crypto long enough you'll know how volatile it is--and you'd think that you would want a stable currency in your treasury instead of one that's relatively new and has a history of brutal volatility.

I've got those companies on my watch list in my brokerage account, and it'll be interesting to see how their stock price performs over time.

[wheelz1200]

There is no way bitcoin can be labeled the best reserve asset right now.  Not because I don't believe in bitcoin or crypto but because its still in its early infacy.  It just came about 10 years ago we can be placing as the industry financial standard yet at this point cmon.

[Harlot]

It's important to point out that when they are talking about cash reserves being an investment they are looking for assets that would likely appreciate in the future, if that is what you meant by a reserve asset then I think it is one of the best ones out there. But if you are talking about a reserve asset that will have a stable price then Bitcoin might not fit as a good reserve asset as it is too volatile. Microstrategy here bought Bitcoin as an investment not for their cash reserve to have another stable state, their cash reserve is just extra money lying around where they are hoping for to make more money out of it.

[Coyster]

...We can't assume what will bitcoin be in the future as early as now though, bitcoins show good characteristics as an investment. But that will not be a guarantee since countries like China are aiming to create their own centralized digital currency which other countries around that globe are doing the same and as of the moment, they are not considering bitcoin as the best one that can resolve most of the issues we are experiencing in fiat.

Bitcoin is a dex crypto, CBDC's aren't going to affect it in any way since it's more or less centralized and keeping them as a reserve currency is the same as holding the country's fiat currency that's vulnerable to inflation/devaluation/manipulation. Mind you that we never expected the government to believe in Bitcoin, that's prolly why they are imposing regulations here and there and launching CBDC's, but Bitcoin is free from their third party control, so whether they 'consider' it or not, it's more of the 'people's' coin and it's value looks like it'll keep appreciating down the years.

[CODE200]

Bitcoin is indeed a profitable investment but there's no certainty with its market value.
I believe Bitcoin is a good investment and I doubt it is the best one. Its market value at this moment is unpredictable.
There will be times wherein huge profit will be earned but for a long time hold, I think changes may apply. Mass adoption is coming tlose to reality and once cerntalization become more dominant, it could affect its effectivity as an investment especially if its market value suddenly become stable.

[Danslip]

The scarcity of reserve assets makes it valuable and there are more than 100 years for the last mined BTC. Maybe there will be supercomputers which can decypher the private keys or can be a threat against the blockchain technology. From this perspective, I doubt the governments will likely accept the BTC as a regular payment method let alone accepting it as a reserve currency. Gold, Euro, and CHF as the main reserve financial assets have a strong backup but this can be standard for government in order to exclude the BTC as a reserve currency.

[exstasie]

I've got those companies on my watch list in my brokerage account, and it'll be interesting to see how their stock price performs over time.

I suppose Microstrategy's stock is going to become tightly correlated to BTC, especially now that they're buying more coins, and can probably be expected to reinvest down the road too. Absent a real ETF, it's actually an interesting way for mainstream stock investors (in other words, not those investing in pink sheet stocks or trading futures) to dabble in exposure to BTC.

[sheenshane]

It's important to point out that when they are talking about cash reserves being an investment they are looking for assets that would likely appreciate in the future, if that is what you meant by a reserve asset then I think it is one of the best ones out there. But if you are talking about a reserve asset that will have a stable price then Bitcoin might not fit as a good reserve asset as it is too volatile. Microstrategy here bought Bitcoin as an investment not for their cash reserve to have another stable state, their cash reserve is just extra money lying around where they are hoping for to make more money out of it.

I tend to agree with you.
This is technically speaking, if it is a reserve asset that the value will be sustainable then Bitcoin isn't the correct one for we all know that Bitcoins value changes from time to time and it doesn't guarantee that it can keep its price or value on a higher rate in time.

We can't even assume that Bitcoin will be in circulation in decades or centuries from now which we all hope to be but investing in Bitcoin and keep it for the future you might just end up desperate if one day your investment in Bitcoins will lose all its value and totally no worth anymore, (which is impossible but we can't mere this fact).

[Lorence.xD]

If it is a business then it should be backed by a careful study on how to maintain the reserve from the purchased price. In my opinion, it is not the best reserve asset for a business because of the market volatility that is still plaguing the bitcoin market. Maybe precious metals will do the work as the best reserve asset because it retains value and the prices although not that stable, you know that you can rely on it when it comes the time to sell it.

[mu_enrico]

Yes, Bitcoin is the best if we rely on the previous 10 years of market data. The problem is no one knows what will happen in the next 10 years. The believer will believe the price will keep rising while the skeptics won't be so sure.

MicroStrategy et al. did a risky bet. They will win big if the price movement is still the same (as historical data). For me, I'll bet on Bitcoin directly, not these companies' stocks.

[Chrystora123]

If it is a business then it should be backed by a careful study on how to maintain the reserve from the purchased price. In my opinion, it is not the best reserve asset for a business because of the market volatility that is still plaguing the bitcoin market. Maybe precious metals will do the work as the best reserve asset because it retains value and the prices although not that stable, you know that you can rely on it when it comes the time to sell it.

each investor has a different view of the "best asset" but when it comes to the "best reserve asset" then precious metals are still the top choice (not high risk or prices tend to be stable)..

Yes, Bitcoin is the best if we rely on the previous 10 years of market data. The problem is no one knows what will happen in the next 10 years. The believer will believe the price will keep rising while the skeptics won't be so sure.

MicroStrategy et al. did a risky bet. They will win big if the price movement is still the same (as historical data). For me, I'll bet on Bitcoin directly, not these companies' stocks.

can say I dare to take risks, I prefer Bitcoin to precious metals because its price has skyrocketed in the last 10 years (9000%).  no one will know in the next 10 years what price Bitcoin will be but I believe Bitcoin will be 10x or more than the current price..

[gantez]

There is no way bitcoin can be labeled the best reserve asset right now.  Not because I don't believe in bitcoin or crypto but because its still in its early infacy.  It just came about 10 years ago we can be placing as the industry financial standard yet at this point cmon.

It can't be given that kind of recognition now because as you said , it is still very new. Gold has been there for long and tasted to stand the test of time. Even though I don't think gold is but bitcoin is not generally accepted yet like fiat is.

[YOSHIE]

Do you think Bitcoin is the best reserve asset we have atm?

I quoted a talk from michael_saylor on Twitter and said.

Twitter michael_saylor

MicroStrategy companies place their funds in Bitcoin to protect their assets against fiat currency inflation.

The bottom line: if the purpose of spare Bitcoin assets is stored and invested by the company, the assessment I agree with the OP.


However, on the other hand, if Bitcoin assets are invested as individual assets, there should be a deeper assessment of: Understanding the crypto-asset phenomenon, its risks and measurement issues, many factors must be considered when making decisions and considering Bitcoin assets as personal assets.

The point: if the individual mature "understands" about Bitcoin / crypto to be used as an asset, plural, no problem.

And if only / limited knowledge about crypto consider the risks.