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BitCoin: Stable Reserve Currency?
10-12-2014, 06:55 PM, (This post was last modified: 10-12-2014, 07:01 PM by Nuke.)
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BitCoin: Stable Reserve Currency?

"According to an economist at the 'stability department' of Sweden's central bank, the Riksbank, Bitcoin could be used to strengthen financial systems in the face of disruption to a main payment processing network."

They bring up an excellent point; one that I didn't think about at first. As the BTC price shifts would indicate, it's a great "currency of last resort". However, I would say this is not the primary reason Bitcoin (or any cryptocurrency) would be kept as a reserve.

It would be great reinforcement, just like precious metals, to traditional currency reserves. Its volatility, despite the fact it yields great disadvantages to smaller investors, means that central banks would be able to utilize its value spikes to bolster the value of the currencies they protect. I'm not exactly an expert on central banking, although being a businessman, I do know a lot about macroeconomics. Therefore, since BTC is obviously too volatile as a short-term investment, it should be treated as a lower-liquidity investment, like gold or silver, and exchanged in bad times when the currency needs to be reinforced. Due to its volatility, it actually gains a strength: It can be used to enact fast relief, only to be recovered at a far lower cost later.

I'd also like to note you, as a smaller investor, also have a use for Bitcoins -- albeit in smaller amounts. When an economic crisis occurs, you can use Bitcoin savings acquired during good times to support yourself. It's essentially the same concept, just on a smaller scale.
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