Why Bitcoin Falls Short as a Reserve Asset: Insights from Swiss Central Bank President

Bitcoin (BTC) has often been touted as “digital gold”, a potential hedge against inflation and a store of value for global economies. However, not everyone shares this optimism—especially central banks. Recently, Swiss National Bank (SNB) President Thomas Jordan weighed in on why Bitcoin falls short as a viable reserve asset for national economies.

As the debate over Bitcoin’s role in the global financial system intensifies, let’s break down the key reasons why central banks remain skeptical about adopting BTC as a reserve asset.

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1. Volatility: The Biggest Roadblock

Unlike traditional reserve assets like gold, U.S. Treasuries, or stable fiat currencies, Bitcoin’s price fluctuates wildly, making it unreliable for central banks that require stability and predictability.

📉 Example:

• Bitcoin reached an all-time high of $69,000 in November 2021, only to crash below $20,000 in the following year.
• Even in 2024, BTC has seen 30%+ price swings in a matter of weeks, making it highly unpredictable.

💡 Why It Matters:
Central banks need stability in their reserves to manage economic crises, foreign exchange liquidity, and monetary policy—which Bitcoin, in its current form, does not provide.

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2. Lack of Intrinsic Value & Government Control

SNB President Thomas Jordan argues that Bitcoin lacks the intrinsic value that fiat currencies and government-backed assets hold.

✔ Gold is backed by physical scarcity and industrial demand.
✔ U.S. Treasuries are backed by the U.S. government’s credit and economic power.
❌ Bitcoin, on the other hand, has no backing from any central authority or tangible asset.

💡 Why It Matters:
Central banks prefer assets they can regulate, manipulate (interest rates, bond issuance), and use in economic interventions—Bitcoin’s decentralized nature makes this impossible.

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3. Energy Consumption & Sustainability Concerns

Bitcoin’s Proof-of-Work (PoW) mining is notoriously energy-intensive. SNB and other central banks remain wary of adopting an asset that:

⚡ Consumes more electricity than some countries (Bitcoin’s annual energy consumption rivals Argentina’s).
⚡ Faces increasing regulatory scrutiny over its environmental impact.

💡 Why It Matters:
As the world moves toward green energy policies, central banks may avoid Bitcoin due to its environmental footprint.

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4. Scalability & Liquidity Limitations

Unlike fiat reserves, which are backed by massive liquid markets, Bitcoin’s liquidity and scalability remain concerns for large-scale financial operations.

• Transaction speed: Bitcoin’s network handles only 7 transactions per second, far behind Visa’s 24,000 TPS.
• Liquidity issues: A sudden central bank liquidation of BTC could cause huge price swings, affecting market stability.

💡 Why It Matters:
For Bitcoin to be a true reserve asset, it must provide instant, seamless liquidity at scale—something it still struggles with.

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Can Bitcoin Ever Become a Reserve Asset?

While Bitcoin’s decentralized and deflationary model is attractive, SNB’s insights highlight key hurdles. However, future advancements might improve Bitcoin’s reserve potential:

✔ Layer-2 solutions (e.g., Lightning Network) could enhance transaction speed and scalability.
✔ More adoption by institutional investors could reduce price volatility over time.
✔ Hybrid reserve models—where central banks hold a mix of Bitcoin and traditional assets—could emerge in the future.

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Final Thoughts

Bitcoin may not yet be a suitable reserve asset for central banks due to volatility, lack of intrinsic value, energy concerns, and liquidity issues. However, as adoption grows and technology evolves, Bitcoin could still play a role in the global financial system, even if not as a full-fledged reserve currency.

🚀 Will central banks ever warm up to Bitcoin, or will its decentralized nature keep it at odds with traditional finance? Only time will tell.