The European Central Bank (ECB) has recently published its annual report on the international standing of the euro. The report highlights the euro's decline in international foreign exchange reserves, which could pave the way for bitcoin to become a major player in the global economy.

The euro's decline is not unique; the dollar has also been struggling. The ECB warns that the euro's status as a major international currency should not be taken for granted. The report notes that some countries are seeking to bypass traditional payment systems and invoicing currencies, and instead, are accumulating gold and other non-standard reserve currencies.

The ECB report also highlights the growing importance of geopolitical risk in the management of foreign exchange reserves. A recent survey by HSBC found that 91 central banks representing 65% of global reserves consider geopolitical escalation as the most important factor affecting reserves composition.

Gold has seen a significant increase in purchases, with central banks buying over 1,000 tons in 2023. China was the largest buyer, and the Sino-Russian strategy appears to be aimed at solidifying their currencies without relying on the US dollar. The yuan is also gaining popularity, with nearly 40% of central banks planning to increase their yuan reserves over the next ten years.

Bitcoin, which is already used as a reserve currency by small countries like El Salvador and Bhutan, has significant potential to become a major player in international trade. With a capitalization equivalent to $1,250 billion, bitcoin represents 10% of global foreign exchange reserves. Bitcoin transactions have also seen significant growth, amounting to approximately $1,000 billion in 2023, compared to Visa and Mastercard's $9,000 billion per year.

Bitcoin's advantages include being stateless, uncensorable, and an absolute store of value, making it poised to become the international reference currency.