China and many major developing countries have long understood the risks of overdependence on the U.S. dollar. Attempts to reduce this dependence have contributed to the recent surge in the price of gold, which has risen by about 65% in one year . According to this logic, if diversification away from the dollar has already begun in the form of gold accumulation, why not also add bitcoin to central banks’ reserves? This would help strengthen the reserves portfolio and increase resilience to US financial sanctions.
Such an idea is not as crazy as it may seem. The risk of great power conflict is increasing, and China and Europe have found it difficult to increase liquidity and payment system independence in yuan and euro, so bitcoin’s attractiveness as a politically neutral reserve asset could increase.
“The Perfect Currency.”
In many ways, bitcoin is the perfect currency for a fragmented and uncertain global landscape. However, the US authorities themselves are fast becoming one of bitcoin’s main supporters, due in no small part to the cryptocurrency lobby’s huge political spending. Few will benefit from this transformation more than the Trump family, which stands to make billions of dollars thanks to the administration’s cryptocurrency policies.
Yes, bitcoin remains highly volatile. Its price has plummeted (from over $124,000 in October 2025 to under $65,000 today), though the price of gold continues to rise. This underscores the uncertainty of bitcoin’s short-term prospects.
Based on long-term trends, a number of analysts believe that the minimum bitcoin price will eventually settle above $100,000. But bitcoin has been around for less than 20 years, and long-term extrapolations usually require at least 100 years of data. Gold, on the other hand, has been a monetary asset for thousands of years, starting in ancient Lydia.
According to the most optimistic forecasts, bitcoin’s total market capitalization will eventually rival that of gold, which is currently estimated at $30-35 trillion. Since bitcoin’s supply is algorithmically limited to 21 million coins, of which approximately 93% have already been mined, its price must exceed $1.5 million per coin to reach that level of capitalization.
Bitcoin’s only “equilibrium” price is zero
On the other hand, many Nobel Prize-winning economists and prominent financial commentators believe that bitcoin’s current valuation is pure speculation. Since bitcoin has no inherent value or fundamental application, they believe its only long-term equilibrium price is zero.
This argument might be persuasive if bitcoin were valued solely for its novelty – as a form of blockchain art. However, its medium-term collapse to zero looks extremely unlikely because of cryptocurrencies’ role in the global underground economy. The size of this economy, which includes illegal operations (money laundering, drug trafficking, tax evasion, and so on), is generally estimated to be above $20 trillion, putting it in the same league as the largest credit card networks.
Suppose bitcoin captures a quarter of this huge underground market, and its value to users is equivalent to 2% of the fees that are typically charged on credit card transactions. This equates to a transaction value of around $100 billion per year. If used correctly, it would easily justify a market capitalization of $1 trillion, which is about $50k per coin.
Admittedly, stablecoins, i.e. cryptocurrencies pegged to the official currency (usually the US dollar), now account for the bulk of cryptocurrency transactions. But in time, dollar-linked stablecoins will probably be regulated in the same way as traditional banking instruments (e.g., debit cards), which will make it easy to trace transactions to identifiable persons, even in complex transfer schemes.
Once this happens, underground users will apparently have to go back to bitcoin. While there are thousands of alternative cryptocurrencies, most of them have faded away in recent years as bitcoin’s advantages, a pioneer with an extensive network and proven stability, allow it to significantly outperform its competitors.
If bitcoin retains some sort of lasting role in transactions, why don’t emerging market central banks diversify with it? There are, of course, serious downsides. First, the mass adoption of cryptocurrencies could reduce the ability of governments to collect taxes. This problem will have to be addressed sooner or later by the authorities (and even by US politicians swamped with crypto-industry sponsorships).
Moreover, if the authorities in all countries with large economies ever follow China’s example and ban cryptocurrency transactions, then even the $50k valuation of bitcoin will be hard to keep. So-called crypto “exchanges” like Coinbase have made it much easier for ordinary people to own bitcoins by making it possible to withdraw them into regular money. Without them, the network effect that greatly increases the price of bitcoin will diminish dramatically.
However, none of this is expected to happen anytime soon. The Trump administration’s strong support for cryptocurrencies and America’s use of the dollar as a weapon in the form of financial sanctions may prompt some central banks to experiment with diversifying into bitcoins. However, replacing the world’s main safe haven will still not be easy. The “new gold” may end up being just gold.
Kenneth Rogoff
Kenneth Rogoff is former chief economist at the International Monetary Fund, professor of economics and public policy at Harvard University, winner of the 2011 Deutsche Bank Prize in Financial Economics, co-author (with Carmen Reinhart) ofThis Time It Will Be Different: Eight Centuries of Financial Folly(Princeton University Press, 2011), and author ofOur Dollar, Your Problem(Yale University Press, 2025).
© Project Syndicate, 2026.
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