Barbados Central Bankers Advise Nation To Hold Small Allocation Of Bitcoin in FX Reserves

This is semi bullish news for bitcoin depending on how you read. Earlier this month a report was written by a pair of economists entitled Should Cryptocurrencies Be Included In The Portfolio Of International Reserves Held By The Central Bank Of Barbados (pdf).

Their conclusion:

The paper uses two main empirical tools to conduct the analysis: a counterfactual exercise using historical performance of the various exchange rates (including Bitcoin) as well as a Monte Carlo forecasts of international reserves for the next 1, 2, 5 and 10 years using a relatively small portfolio composition of Bitcoin (0.01 percent). The counterfactual exercise suggests that had the Central Bank of Barbados held a relatively small proportion of its portfolio in Bitcoin between 2009 and 2015, the impact on reserve balance volatility (due to exchange rate variation) would not have been significantly different from that experienced due to other major currencies. In addition, the appreciation in the value of the Bitcoin portfolio (in US dollars) would have also generated a significant return for the Bank. The Monte Carlo forecasting exercise 23 yields similar results. However, the paper notes that as the proportion of reserves held in Bitcoin rises, the volatility of reserves would also increase. Given that the proportion of transactions done by Barbadians in digital currency is not likely to exceed 10 percent of all transactions in the short run, it is therefore recommend that if Bitcoin is incorporated into the portfolio of foreign balances of the Central Bank of Barbados, that its share should be relatively small. 

So it's nice to see that economists at a national central bank are investigating how using Bitcoin as a part of their FX reserve portfolio would affect things. They analyzed it with a 0.01% portion of the portfolio, which is a really low allocation, but it's nice to see that they do recommend that if they do incorporate cryptocurrency that it would be recommendable to set aside a small portion in Bitcoin, but to keep it small.