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SNB President misunderstands Bitcoin – Bitcoin Magazine: Bitcoin News, Articles, Charts & Guides

By on April 30, 2021 0

Today, a report emerged indicating that Swiss National Bank (SNB) President Thomas Jordan commented on the liquidity of the “cryptocurrency” market.

“Cryptocurrencies are not liquid enough for the bank to have any of its investment assets,” Jordan said.

Although the president did not specifically mention bitcoin by name, bitcoin is by far the most liquid asset in the cryptocurrency market, and it is the only logical choice for the central bank to add. on its balance sheet among all “crypto-currencies”. reason why it rejects the liquidity of Bitcoin.

In his Annual report 2020however, the bank reported an asset allocation of 91% foreign currency investments, 5% gold, 1% Swiss bonds and 3% miscellaneous assets, totaling CHF 999,027,900,000 (or $ 1,094,506,994,458).

Looking at the report and the SNB’s strategy in general, it becomes clear that Jordan does not understand bitcoin, its liquidity, or its position in relation to investment assets that it considers “sufficiently liquid”.

“The most important element in managing absolute risk is broad diversification of investments. Risk is managed and mitigated through a system of benchmarks, guidelines and limits. All relevant financial risks associated with investments are identified, assessed and monitored on an ongoing basis. Risk measurement is based on standard risk indicators and procedures. In addition to these procedures, sensitivity analyzes and stress tests are regularly carried out. The SNB’s overall long-term investment horizon is taken into account in all these risk analyzes …

Foreign exchange reserves are mainly made up of gold, bonds and stocks. The diversification effects generated by adding equities to a portfolio as well as the high liquidity of equities make them an attractive asset class for the SNB. In addition, given that the expected return is higher on equities than on bonds, this asset class makes it possible to preserve the real value of foreign exchange reserves. – SNB Annual Report 2020.

With the strengthening of the Swiss franc over the past two decades, the SNB has engaged in the practice of printing francs to purchase dollars (and other foreign currencies) and to purchase dollar-denominated assets, including including a large number of US stocks.

USD / CHF trading pair since 2003

Claiming that “cryptocurrencies” (read: “bitcoin”) are not liquid enough to invest is laughable. In what CEO Elon Musk called a recent test of Bitcoin’s liquidity, Tesla made a profit of $ 272 million on its recent investment.

It is clear that Jordan is trying to downplay what is really going on: Central banks are being moved and disrupted by superior real-time technology, and game theory suggests that they should further accelerate their own demise by racking up the first and second. the rarest in the world. monetary asset.

If the SNB was really interested in mitigating risk through diversification, as well as investing with a ‘long-term time horizon’, it would start accumulating bitcoin and likely not disclose the stock. The numbers don’t lie, bitcoin as an asset is actually the less “Risky” in terms of risk-adjusted returns.

The theoretical adoption of bitcoin games at the nation state and central bank level has yet to begin. No one is better than their incentives, and the incentive to adopt bitcoin early at the central bank and sovereign level is too strong. Expect a buildup of bitcoin by the central bank, even if it denounces it.

Comments from the President of the Swiss National Bank indicate that he either does not understand the bitcoin market or is strategically downplaying it.

For HODLers and bitcoin stackers around the world, let’s hope Jordan is truly oblivious and doesn’t yet realize that he doesn’t have a choice to buy bitcoin or not, but can only choose what. ‘at what price to buy it.