Cryptocurrencies: Reserve Currencies or NOT?

Complicated matters that could have massive implications on the global economy.Since Bitcoin (BTC) was launched into the market, many cryptocurrency enthusiasts argue that Bitcoin is the best alternative to the reserve currency. Especially when we think about the disastrous implications of infinite money printing, Bitcoin and various cryptocurrencies could be used to protect the value of local currencies. Here, we’ll have a look at whether cryptocurrencies could become reserve currencies and what kind of cryptocurrencies could be reserve currencies for central banks.Before we get into the topic, let’s have a discussion about the definitions of Money and reserve currency.So, what is money?Money can be defined as a medium of exchange, store of value, unit of account, and a policy instrument. In other words, money is used to pay for goods and services, save up for the rainy days, and a stable place where you could store.So, what is reserve currency?Reserve currencies are a large quantity of currency maintained by central banks and other financial institutions to prepare for investments, transactions, and international debt obligations, or to influence domestic exchange rates. Reserve currencies affect the prices of most commodities and many institutions would have to hold reserve currency to pay for these goods so that they could be used for production.What are the characteristics of reserve currencies?-Minimal risks to currency-related to economic environments-Being liquid and widely accepted medium of exchange around the World-Having reliability on global affairs-Having network externality on a global scale-Easily tradeable low-risk assetsWhat were reserve currencies before the US government has turned into fiat currency?Throughout history, there were various commodities were used as reserves for countries. However, sovereign states used gold, silver, bronze, copper, nickel, and other valuable items as some sort of reserve currency so that it could bolster the local economy. Now, let’s have a look…