Matthew Ferranti is a PhD candidate at Harvard, a prestigious private university located in Cambridge, USA. The doctoral student, who is a candidate in the economics department, produced a document after several searches. The latter is titled:Hedging Sanctions Risk: Cryptocurrencies in Central Bank Reserves“. Discover the content of this document which highlights the potential of bitcoin (BTC).
Central banks should hold even a small amount of bitcoin (BTC)
In his document of research, Matthew Ferranti supported that central banks should hold bitcoin (BTC). The doctoral student believes that the latter can use the flagship crypto as an alternative hedging asset. The BTC could thus allow them to fight against potential financial sanctions from the issuers of monetary reserves.
Thereby, even under normal circumstances, central banks should own at least a small amount of bitcoin, according to Ferranti. They would add BTC to their gold reserves. The researcher clarified that the amount of BTC held should be larger when there is a risk of sanctions.
“Central banks can move their international reserves to protect against the risk of financial sanctions from issuers of fiat reserve currency. […] This article explores the potential of bitcoin to serve as an alternative hedging asset“, can we read in the research document.
Opt for a reserve of BTC when you cannot have a sufficient gold reserve
According to the Harvard researcher,the risk of sanctions may reduce the attractiveness of US Treasuries“. This risk could also lead central banks to further diversify their reserves. Likewise, he couldsupport the long-term fundamental value of cryptocurrencies and gold“.
Furthermore, Matthew Ferranti points out that some central banks cannot acquire enough gold to cover sanctions risks. It therefore advises these banks to turn to bitcoin (BTC) which could be an optimal alternative.
It appears that the doctoral student proposes “a dynamic Bayesian copula model to simulate the joint returns of bitcoin and other reserve assets under a wide range of plausible sanction probabilities“.
Ferranti believes that central banks would benefit from diversifying their reserves. The researcher advises them to allocate portions to both bitcoin and gold to combat possible financial penalties.
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