Reserve currencies are about settlement reliability, not upside or scarcity
If an asset’s volatility routinely forces margin requirements to be raised during stress, that asset is implicitly unsuitable as a reserve anchor. Reserve instruments must reduce systemic risk, not amplify it. Extreme tail behavior isn’t just a pricing issue — it’s a settlement problem.
A reserve currency (or reserve asset) has one primary job:
To clear obligations under stress without changing the rules mid-game.
That means:
Margin terms must be predictable
Volatility must be absorbable, not explosive
Collateral value must not gap violently when it’s most needed
If an asset repeatedly forces sudden margin hikes, it is telling you something important:
It cannot be relied upon as neutral collateral during stress.
Margin hikes are a confession, not a policy choice
When exchanges raise margin on metals (or crypto, or anything):
They are implicitly saying:
“This asset cannot be trusted to self-stabilize”
“Risk is nonlinear and model-breaking”
“Participants must post more collateral because price discovery is unstable”
That is the opposite of what a reserve asset is supposed to do.
This is where the “10-sigma event” language actually matters
People throw around “9-sigma, 10-sigma” casually, but here’s the key distinction:
Occasional extreme moves → tolerable
Frequent tail events that force rule changes → disqualifying
If an asset regularly experiences moves so large that:
Margin rules must be rewritten
Liquidity providers step back
Clearinghouses intervene defensively
Then statistically speaking, that asset is not behaving like money.
It’s behaving like a speculative instrument.
You don’t need to claim the dollar is “perfect” or “strong forever.”
You just need to observe this:
The dollar’s volatility does not trigger margin regime resets
Dollar funding markets remain open because they are boring
Stress flows into USD precisely because it doesn’t gap uncontrollably
Reserve status is earned by not surprising anyone.