Shrinking Dollar Share Does Not Necessarily Mean Central Bank Buying

New research from the New York Fed suggests that the decline in the dollar share of global official foreign-exchange reserves may not necessarily indicate central bank buying of Bitcoin. Between 2015 and 2025, the dollar share fell from 64% to 56%, according to IMF COFER data.

However, the researchers found that a few large reserve portfolios can lower the global dollar share without a broad retreat from dollars. They identified two channels through which this can happen: changes in the currency mix of reserve portfolios (the 'preferences' channel) and growth or shrinkage of total reserves, changing their weight in the global average.

For example, between 2015 and 2019, Switzerland's reserve growth pushed down the aggregate share even as its own dollar allocation rose. The researchers also found that some countries may have changed their reserve mix to diversify beyond liquidity needs, without necessarily buying Bitcoin.

The study highlights the importance of distinguishing between a shrinking average and an investment decision when assessing sovereign demand for Bitcoin. A central bank's purchase of Bitcoin is still required to be explicitly disclosed and separate from its official reserves.