BITCOIN AS A POTENTIAL RESERVE ASSET: ADVANTAGES AND LIMITATIONS

Abstract

The article provides a comprehensive analysis of the prospects and limitations of using Bitcoin as an alternative reserve asset in the context of global financial system transformation. The study examines the structural characteristics of Bitcoin that make it a potentially attractive reserve asset: limited supply, decentralized nature, independence from government control, and resistance to censorship and confiscation. The growing liquidity of the cryptocurrency market and the development of institutional infrastructure that facilitates access to Bitcoin for traditional financial institutions are analyzed. At the same time, significant challenges limiting Bitcoin's potential as a reserve asset are identified: high price volatility, regulatory uncertainty, energy-intensive mining, technological risks, and scalability issues. Special attention is paid to the specifics of Bitcoin usage by different categories of institutional entities – corporations, financial institutions, and states. A comparative analysis of Bitcoin's characteristics against traditional reserve assets such as gold and government bonds is conducted in terms of liquidity, value stability, reliability, and general recognition. The practical experience of using Bitcoin as a reserve asset is examined through examples of corporations that have included it in their treasury reserves and states, particularly El Salvador. It is established that the optimal scenario involves including Bitcoin as an additional component in a diversified portfolio of reserve assets, taking into account its low correlation with traditional financial instruments. The article substantiates that Bitcoin's potential as a reserve asset may increase with the development of environmentally friendly mining practices, improvements in scaling technologies, formation of a clear regulatory environment, and deepening institutional adoption. The research methodology combines theoretical analysis with empirical data examination, including statistical analysis of Bitcoin's price dynamics and correlation patterns with traditional assets. The findings contribute to the understanding of cryptocurrency's role in modern monetary policy and provide practical recommendations for institutional investors considering Bitcoin integration into their reserve strategies.