IMF COFER Q2 2025: What the Data Means for Dedollarization and Crypto

Overview

The International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (COFER) release for Q2 2025 provides important clarity on recent narratives of global “dedollarization.” While headline figures showed a decline in the US dollar’s share of reserves, a large portion of that move was driven by exchange-rate valuation effects rather than active portfolio reallocation by central banks.

For crypto market participants, and for investors who have viewed dedollarization as a potential structural bullish catalyst for Bitcoin and other digital assets, the COFER data underscores the need to distinguish between temporary valuation shifts and true reserve diversification.

Key findings from COFER Q2 2025

• The COFER dataset covers reserve holdings reported by 149 economies and remains a primary source for assessing official reserve composition.
• Headline numbers showed the US dollar’s reserve share falling to 56.32% in Q2 2025.
• However, when adjusted for constant exchange rates, the dollar’s share only edged down to about 57.67%—a marginal change that indicates limited active selling of dollar reserves.
• Currency valuation shifts were the dominant driver of headline changes. In H1 2025, the US dollar experienced material depreciation against several major currencies, including a DXY decline of more than 10%—one of the largest drops in decades.
• Reported increases in shares for currencies such as the euro and the pound were mostly valuation effects; the euro’s headline share rose to about 21.13% in Q2 2025, yet at constant exchange rates the euro’s share was essentially flat or slightly lower.

Exchange-rate effects versus portfolio reallocation

COFER publishes both headline reserve shares and adjusted figures that control for exchange-rate movements. This distinction is critical:

• Headline reserve-share changes reflect the market value of holdings in reporting currencies. Large FX swings can therefore change percentages without any buying or selling by central banks.
• Exchange-rate–adjusted (constant price) data isolates actual portfolio reallocation by removing valuation noise. In Q2 2025, this adjusted series showed only a small change in dollar allocations, signaling that central banks largely maintained their dollar exposure.

Put simply, a fall in the dollar’s headline share driven by strong gains in other currencies does not automatically imply active diversification away from USD-denominated assets.

Why this weakens near-term dedollarization narratives

Dedollarization refers to a gradual reduction in reliance on the US dollar for international trade, reserves, and financial contracts. The assertion that dedollarization is accelerating has been advanced as a structural tailwind for assets marketed as alternatives to the dollar, including gold and some cryptocurrencies.

COFER Q2 2025 suggests a more cautious interpretation:

• Most of the headline deterioration in the dollar’s share came from valuation effects, not sustained portfolio reallocation by reserve managers.
• Central banks prioritize liquidity, market depth and operational reliability in reserve assets. The US dollar remains dominant because of deep markets, wide acceptance, and established infrastructure—factors that are not immediately displaced by short-term FX volatility.
• Any durable shift away from the dollar would likely require coordinated policy changes, alternative deep and liquid markets, or material changes in geopolitical or monetary dynamics. These developments typically unfold over multiple years.

Implications for Bitcoin and other digital assets

Bitcoin and other cryptocurrencies have often been framed as hedges against dollar debasement or as alternative store-of-value instruments that could benefit from dedollarization. The COFER findings nuance that narrative in several ways.

Short- to medium-term price drivers

• Headline FX-driven shifts do not necessarily translate into portfolio flows into crypto. If central banks did not materially rebalance reserves, there is less evidence of a surge in institutional demand for alternatives as official reserve assets.
• Crypto price action remains sensitive to macro variables such as US monetary policy expectations, real yields, and risk-on/risk-off sentiment rather than reserve composition alone.
• Exchange-rate volatility can affect cross-asset correlations. For instance, a weaker dollar can coincide with higher risk appetite, which may buoy equities and select crypto assets—without implying structural reserve diversification into those assets.

Structural hurdles for crypto as reserve alternatives

• Liquidity and market depth: Central banks require deep, liquid markets for reserves. Most crypto markets still fall short of the depth of major sovereign bond markets.
• Operational and legal frameworks: Custody, settlement, and regulatory clarity are necessary prerequisites for official reserve use. Progress is being made but remains uneven globally.
• Price stability: Volatility remains a major obstacle for reserve-class use. Stablecoins and tokenized sovereign debt aim to address this but raise their own technical and regulatory issues.

2025 market context and what to watch next

As 2025 progresses, several macro and market factors will determine how COFER trends and FX volatility translate into broader asset flows.

• Monetary policy path: Central banks’ decisions on rates and balance sheet policies will remain the primary driver of dollar strength or weakness. Watch forward guidance and inflation trajectories.
• FX volatility and valuation adjustments: Large currency swings can distort reserve-share headlines. Use exchange-rate–adjusted COFER data to assess actual portfolio moves.
• Reserve diversification signals: Look for explicit statements from reserve managers, formal diversification programs, or legal/tax changes that would encourage non-dollar reserve holdings.
• Institutional crypto adoption: Flows into regulated institutional products, custody arrangements, and spot ETF approvals (where applicable) are more direct indicators of institutional demand than reserve data alone.
• Geopolitical developments: Sanctions, trade realignments, and regional currency initiatives can prompt genuine diversification over the medium term—these are easier to track via policy announcements than by looking only at quarterly reserve shares.

What this means for traders and investors

The COFER Q2 2025 release is a reminder to use context and adjusted metrics when interpreting macro data. For market participants, practical takeaways include:

• Prioritize exchange-rate–adjusted reserve data to avoid mistaking valuation effects for active reallocation.
• Monitor macro indicators—real yields, inflation expectations, policy shifts—that have a more immediate influence on risk assets and crypto prices.
• Consider liquidity and custody requirements when evaluating whether crypto assets can realistically substitute for traditional reserve currencies.
• Use multi-factor analysis: on-chain flows, institutional inflows, derivatives positioning and macro backdrop together paint a fuller picture than reserve-share headlines alone.

MEXC perspective: data-driven decision making

For traders and investors using MEXC’s markets and analytics, the COFER Q2 2025 report underscores the importance of combining macro intelligence with market-level signals. Short-term FX-driven headlines can create noise; adjusted reserve measures and real-time market indicators help identify true shifts in demand.

Risk management remains essential. Volatility around FX and macro surprises can create trading opportunities but also amplify downside risk. Stay informed on central bank communications, COFER updates, and liquidity conditions across both traditional and digital markets.

Conclusion: measured interpretation over sensational headlines

COFER Q2 2025 weakens the case that rapid, systemic dedollarization occurred during the quarter. Most of the observed change in reserve shares was the result of exchange-rate valuation effects, not broad-based central-bank reallocation away from the US dollar.

For crypto investors, the report suggests tempering interpretations that treat dedollarization as an immediate structural tailwind. Instead, focus on a combination of macro policy developments, institutional adoption indicators, and market liquidity improvements when assessing the long-term role of digital assets.

Key takeaways

• Headline reserve-share shifts in Q2 2025 overstated active dedollarization due to currency valuation effects.
• Exchange-rate–adjusted COFER figures show only marginal moves in dollar allocations, implying central banks largely maintained USD exposure.
• Durable reserve diversification typically requires sustained policy, market depth and operational changes—factors that evolve over years rather than quarters.
• Crypto investors should combine adjusted reserve data with macro indicators, institutional flow metrics and liquidity analysis when forming views on market direction.

As 2025 unfolds, continuing to track COFER releases alongside central bank communications and market-level data will provide the best insight into whether dedollarization trends accelerate or remain a headline phenomenon driven by FX volatility.

Disclaimer: This post is a compilation of publicly available information.
MEXC does not verify or guarantee the accuracy of third-party content.
Readers should conduct their own research before making any investment or participation decisions.