GuShiio.com Bitcoin as “digital gold” will continue to benefit from the loose environment for dollar liquidity.
On January 7, 2025,Aleš Michl, President of the Czech National Bank, has put forward a groundbreaking proposal to include Bitcoin (BTC) in the country’s foreign exchange reserve assets.This proposal not only triggered widespread discussions in the Czech Republic and abroad, but also demonstrated the potential of cryptocurrencies as a central bank reserve asset and is receiving more and more attention. Globally, El Salvador is the first country to use Bitcoin as legal tender. Its Bitcoin reserves have reached 6068 and its market value exceeds US$554 million, fully demonstrating the potential of Bitcoin as a reserve asset. In addition, MicroStrategy, one of the world’s largest bitcoin holders, currently holds nearly 480,000 bitcoins with a market value of approximately US$31.1 billion. These measures have provided strong support for Bitcoin to enter the capital market.
If the Czech proposal is implemented, it is expected to use about 7 billion euros to purchase 70,000 bitcoins, which will make the Czech Republic the third largest holder of bitcoins in the world, after the United States and China, further promoting Bitcoin recognition as a global reserve asset.
This proposal may have far-reaching implications for the European crypto market,Especially at a time when major economic countries such as France and Germany are experiencing political turmoil.In 2024, large-scale protests broke out in France over pension reform and high tax burdens, and social unrest intensified mistrust of the traditional financial system.France may re-examine the potential of crypto assets and may relax regulation of cryptocurrencies to promote the development of digital currencies.In Germany, the economic slowdown, energy transformation and internal political frictions have led to increasing public interest in crypto assets. Especially in the application of green finance and blockchain technology, Germany may adjust its policies more flexibly in the future.
From a global economic perspective, since the United States implemented quantitative easing in 2020,The Federal Reserve injected more than $5 trillion in liquidity into the market,Although it has promoted the economic recovery of the United States, it has brought pressure to the European economy. The appreciation of the euro and imported inflation have become prominent problems.Eurozone inflation once reached a record high of 10.6% in 2022。In this context, European countries are promoting green and digital transformation and reducing dependence on the U.S. dollar through crypto assets. The Czech Bitcoin reserve proposal just meets this demand and provides a new economic growth point for the Czech Republic and Europe.
However, the Czech proposal faces certain challenges, especiallyEuropean Central Bank President Christine Lagarde strongly opposed it.She believes that Bitcoin’s high volatility, lack of regulatory framework and potential threats to financial stability make it unsuitable as a central bank reserve asset. Despite this, since the Czech Republic has not yet joined the euro zone and its central bank has certain independence in monetary policy, the Czech Republic may still break through the resistance of the European Central Bank and advance the Bitcoin reserve proposal. In addition, the Czech government recently passed a new bill that allows individuals who have held Bitcoin for more than three years to be exempt from capital gains tax, further demonstrating the Czech Republic’s friendly attitude towards cryptocurrencies and consolidating its important position in cryptoasset innovation.
Although the Czech proposal faces opposition from the European Central Bank in the short term,But the government’s long-term policies clearly support this trend.The Czech policy environment and support for Bitcoin will promote Bitcoin’s status as a reserve asset.
In the future, the market will continue to pay attention to several key factors: changes in the attitude of the European Central Bank, whether the Czech Republic can break through the opposition of the European Central Bank, and whether the Czech Republic can further promote policies that are conducive to crypto assets, especially the policy on capital gains tax and other relevant Legal adjustments. We will continue to track these key data and policy developments and focus on their impact on Bitcoin’s potential as a reserve asset. The Czech incident is analyzed as follows:
1. Background summary
On January 7, 2025, Aleš Michl, President of the Czech National Bank (CNB), first proposed a strategy to consider including Bitcoin (BTC) in foreign exchange reserves, marking that the Czech Central Bank may become the world’s first Western central bank to hold crypto assets. The proposal has attracted widespread attention, especially as crypto assets are increasingly valued by global investors. On February 6 of the same year, the Czech government passed a new bill allowing individuals who have held Bitcoin for more than three years to be exempted from capital gains tax. This policy provides strong support for Bitcoin as a strategic asset and also demonstrates the Czech Republic’s friendly attitude towards cryptocurrency. According to Michl’s remarks, CNB is actively seeking to diversify its reserve assets and plans to increase its gold holdings to 5% of total assets by 2028, while also considering investing some of its foreign exchange reserves in Bitcoin.
2. Impact on the crypto market
Investment return potential: Bitcoin has performed well since its launch, with an annual return of 130% in recent years, far exceeding gold (about 30%). In the current global economic environment, Bitcoin’s performance makes it a potential reserve asset. If more countries include Bitcoin in reserves, it may be able to challenge the status of traditional “safe” assets such as gold. Market reaction and impact: The Czech Central Bank proposes to invest 5% of its foreign exchange reserves (about 7 billion euros) in Bitcoin, which is equivalent to purchasing 70,000 bitcoins. At the current market price of Bitcoin (about US$100,000/piece), this will make the Czech Republic the third largest holder of Bitcoin in the world, after the United States and China. This move may trigger market recognition of Bitcoin as a strategic asset and push more countries to consider including Bitcoin in reserves. Global trends: Previously, El Salvador and the Central African Republic have included Bitcoin in legal tender and included it in foreign exchange reserves. If the Czech Republic finally adopts the proposal, it will become the third country in the world to use Bitcoin as a reserve asset.
3. Integration of Czech Central Bank Policies and Cryptocurrency Market
Since Aleš Michl became governor of the Czech National Bank in July 2022, the Czech Central Bank has adopted tough policies to deal with the inflation rate of as high as 17.5%, successfully reducing it to the target level. At the same time, a series of policies have also put pressure on the Czech balance sheet.
In order to increase the return on foreign exchange reserves, the central bank is promoting asset diversification, planning to increase the proportion of equity investment to 30%(about half of which is in U.S. stocks) from 2024, and increase its gold reserves to 100 tons, accounting for 5% of foreign exchange reserves. In addition, the central bank is exploring including Bitcoin in reserves to further enrich its asset portfolio and increase returns.
The Czech Republic has a friendly attitude towards cryptocurrencies. Prague has the highest Bitcoin ATM density in Europe, and some merchants have accepted Bitcoin payments. An active crypto community and open regulatory environment make it an important market for the European crypto industry. Although the “Digital Strategy 2030” launched in 2022 does not explicitly involve cryptocurrency, it contains support for blockchain technology and provides a favorable external environment for the central bank to adopt Bitcoin. The Czech Central Bank’s diversification strategy complements the vigorous development of the crypto market, laying the foundation for future reserve asset innovation.
4. Policy evaluation
1. The Life of Aleš Michl, Governor of the Czech Central Bank
Aleš Michl has served as governor of the Czech Central Bank since July 2022. He holds a doctorate in finance from the University of Economics and Business in Prague, and has worked as an investment strategist in several banks. He also co-founded an algorithmic asset management fund that focuses on the U.S. stock market and the Czech currency market. Michl advocates monetarism and is deeply influenced by Milton Friedman’s theory. He believes that the primary task of central banks is to curb inflation and stabilize the economy by controlling the money supply. He proposed including Bitcoin (BTC) in foreign exchange reserves, believing that Bitcoin, as an emerging asset, can not only diversify reserves, but also have high return potential, especially in the context of increasing uncertainty in global financial markets. Centralization features provide hedging functions.
2. Aleš Michl’s policy proposition
Michl pointed out that the Czech Central Bank’s foreign exchange reserves are too dependent on the US dollar and gold and appear fragile in the current global economic environment. He advocated diversifying the reserve asset portfolio through Bitcoin to reduce reliance on traditional assets. Bitcoin has achieved an annualized return of as high as 130% in recent years, making it an attractive asset class. Although the Bitcoin market is highly volatile, Michl believes that risks can be controlled through appropriate risk management. He hopes to increase the return on reserve assets by including Bitcoin in foreign exchange reserves, especially seeking new growth points beyond low-yielding gold and fiat tender assets.
3. Czech policy promotion and decision-making process
The Board of Directors of the Czech National Bank is conducting an in-depth analysis of the feasibility of Bitcoin as a foreign exchange reserve asset. According to the previous decision-making process, it takes weeks and months for the board of directors to evaluate the proposal and finally vote to decide whether to implement it. The Czech central bank’s policy independence means that even in the face of external opposition, the central bank can still make decisions based on its own needs. Based on past decision-making timelines, decisions by the Board of Directors of the Czech National Bank usually take several months. For example, when the Czech Central Bank decided to intervene in foreign exchange to prevent deflation in 2013, the decision took about five months from proposal to implementation. At present, the proposal to include Bitcoin in reserves is still in the analysis stage and it is expected that more time will be needed to complete the risk assessment.
4. The life of European Central Bank President Christine Lagarde
Christine Lagarde is the current President of the European Central Bank and has served as French Finance Minister and International Monetary Fund (IMF) President. She has extensive influence in the global financial field, promoting financial stability, monetary policy reform and sustainable development of the global economy. Lagarde has always emphasized financial stability and inflation control, leading the European Central Bank to adopt loose monetary policy, especially in response to the euro zone economic crisis. As an experienced financial leader, Lagarde is cautious about crypto assets such as Bitcoin, arguing that their high volatility and lack of regulation may have a negative impact on the stability of the financial system.
5. Lagarde’s policy proposition
The Czech Central Bank’s bitcoin reserve proposal triggered a strong reaction from the European Central Bank (ECB). European Central Bank President Christine Lagarde publicly expressed her opposition to the inclusion of Bitcoin in reserve assets, citing its high volatility and the risk of concentrated holding. “I believe Bitcoin will not enter the reserves of any central bank on the General Council,” she said at a press conference after the ECB’s interest rate decision was announced. It can be seen that the attitude is relatively tough.
Although Lagarde’s opposition does not have the effect of mandatory intervention, especially since the Czech Republic has not yet joined the euro zone, the Czech Central Bank is relatively independent in monetary policy. However, his opposition is stronger. Therefore, Lagarde’s attitude may have an impact on the Czech Central Bank’s decision-making process. The Czech Central Bank will need to further evaluate the risks and potential of Bitcoin at the board level and decide whether to adopt this proposal.
Lagarde opposes including Bitcoin in the euro zone reserve assets for five main reasons:
- High volatility: The sharp price fluctuations of Bitcoin may lead to large fluctuations in the value of central bank reserves, thus affecting the stability of monetary policy and the stability of the financial system.
- Concentrated holding risks:The uneven circulation of Bitcoin, and a few large households or institutions control most of the Bitcoin, may lead to market manipulation and unfair price fluctuations, which pose a threat to the stability of central bank reserve assets. Lack of regulatory framework: Currently, cryptocurrency markets such as Bitcoin lack unified global supervision, making them vulnerable to the risks of manipulation and fraud, increasing the uncertainty of central bank reserves.
- Does not meet reserve asset standards: Bitcoin does not have the stability and liquidity of traditional reserve assets, and may not be able to provide the liquidity support needed by central banks, especially under extreme market conditions.
- Financial stability issues: Bitcoin’s high volatility may exacerbate systemic risks, especially in countries with fragile economies, posing a threat to financial stability.
V. Conclusion and Outlook
The Czech National Bank has proposed to include Bitcoin in foreign exchange reserves, marking a major innovation in asset allocation among central banks around the world. If the proposal is adopted, the Czech Republic will become one of the world’s important Bitcoin holders, promoting widespread recognition of Bitcoin as a strategic reserve asset. This is not only expected to increase the Czech Central Bank’s reserve return, but will also enhance the Czech Republic’s competitiveness in global financial markets.
However, the disagreement between Czech Central Bank Governor Michl and European Central Bank President Lagarde highlights the still significant differences in the status of crypto assets in the international financial system. Lagarde’s strong opposition may have an impact on the decisions of the Czech Central Bank, especially on monetary policy coordination and financial stability. Although the Czech Republic has strong independence in monetary policy, how to balance the high volatility of Bitcoin with the stability of reserve assets remains an important challenge facing central banks around the world.
However, the Czech government’s recent adoption of a new bill-allowing individuals who have held Bitcoin for more than three years to be exempted from capital gains tax-provides strong support for Bitcoin as a strategic asset and reflects the Czech Republic’s friendly attitude towards cryptocurrencies.
Although the Czech proposal is subject to opposition from the European Central Bank in the short term, and whether to include Bitcoin in reserve assets has not yet been determined, the Czech government’s long-term policy direction clearly supports this trend. The Czech policy environment and support for Bitcoin will promote Bitcoin’s status as a reserve asset.
As more countries begin to discuss the possibility of Bitcoin as a reserve asset, the role of cryptocurrencies as a strategic asset may be further confirmed.However, finding a balance between high volatility and reserve asset stability remains a key challenge facing central banks.
Bitcoin Outlook for 2025
Macro background and Bitcoin’s strong position In the next two years, US dollar assets are expected to remain strong, and Bitcoin, as “digital gold”, will continue to benefit from the loose environment of US dollar liquidity. In the first half of 2025, approximately US$700 billion in reserve funds released by the U.S. Treasury will boost market liquidity and provide support for risky assets such as Bitcoin. Although Europe and the United States are gradually solving supply-side problems, global inflationary pressures still exist, and Bitcoin’s anti-inflation properties will attract more institutional and individual investors. The approval of Bitcoin ETF and the growth of its positions in 2024 have laid a solid foundation for it. It is expected that Bitcoin ETF positions will surpass gold in 2025 and become an important choice for mainstream asset allocation.
Buying volume and price increase are estimated that after the launch of the Bitcoin ETF in 2024, institutional funds will flow in large amounts, and this trend is expected to accelerate in 2025. According to Bloomberg data, the asset management scale (AUM) of Bitcoin ETF has exceeded US$50 billion in 2024 and is expected to reach more than US$100 billion in 2025. Individual investor participation will also increase, with the number of mainstream exchange users expected to increase by 20%-30%, pushing Bitcoin’s average daily trading volume to exceed US$50 billion. In addition, after Bitcoin is halved in 2024, miners ‘selling pressure will be significantly reduced. It is expected that miners’ positions will remain below 1 million BTC in 2025, further reducing market supply. Bitcoin’s history, a four-year halving cycle has usually been accompanied by significant price increases. After halving in 2024, Bitcoin prices in 2025 are expected to replicate the bull market performance of 2017 and 2021. According to historical data, the price increase of Bitcoin in the 12-18 months after halving is usually 300%-500%. Technically, Bitcoin’s long-term support is around US$30,000, while the loose liquidity environment in the first half of 2025 may push Bitcoin to exceed US$100,000 or even challenge the all-time high of US$150,000. According to Glassnode data, the number of active addresses and positions on the Bitcoin chain continue to grow, and the market sentiment is optimistic. It is expected that the Bitcoin price increase in 2025 will be between 150% and 200%, and the target price range at the end of the year will be US$120,000-US$150,000.
Potential catalysts and risks The integration of AI and blockchain, geopolitical risks and the acceleration of global compliance processes will become catalysts for Bitcoin’s rise. However, policy uncertainty (such as the U.S. debt ceiling issue) and black swan events (such as the yen system crisis) can trigger market volatility. To sum up, 2025 will be a critical year for Bitcoin, with macro liquidity, institutional capital inflows and technical support jointly driving its price to rise sharply. Bitcoin is expected to increase by 150%-200% throughout the year, with a target price range of US$120,000 -150,000. Investors can focus on the beta market window in the first half of the year and prepare for defensive counterattacks throughout the year.
