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Bitcoin is at a “tipping point” and could in the future become the currency of choice for international trade or face a “speculative implosion,” Citi analysts said.
This image shows a collection of bitcoin (virtual currency) tokens. Illustration taken on December 8, 2017. REUTERS / Benoit Tessier / Illustration / File photo
LONDON: Bitcoin rose nearly 6 percent on Monday as risk assets rallied after last week’s bond slide cooled, and Citi said the most popular cryptocurrency was at a “tipping point. “and it could become the currency of choice for international trade.
With the recent adoption of companies like Tesla Inc and Mastercard Inc, Bitcoin could be at the beginning of a “massive transformation” into the mainstream, Citi added.
Bitcoin, which has risen to $ 47,000 from $ 4,700 last March, could eventually become the currency of choice for international trade or face a “speculative implosion,” the investment bank said.
It was up 5.7 percent to $ 47,834 as of 1127 GMT on the Bitstamp exchange. Smaller rival Ether rallied 7.5% to $ 1,525.
Bitcoin’s recent performance has come with increasing participation from institutional investors in recent years, in contrast to its strong focus on retail investors for most of the last decade, Citi added.
If businesses and individuals gain access through digital wallets to the central bank’s planned digital cash and so-called stablecoins, bitcoin’s global reach, traceability and potential for quick payments would see it “in an optimal position” to become. in the currency of choice for international trade, Citi said.
Bitcoin, designed as a payment tool, is little used for trading in major economies, hampered by high volatility and relatively expensive transactions. Still, over the last year it gained traction in some emerging markets like Nigeria.
Such a dramatic transformation for bitcoin into the de facto currency of world trade, a state that currently holds the dollar, would depend on changes in its market to allow for broader institutional participation and closer oversight by financial regulators, Citi said. .
Still, changes in the macroeconomic environment may also make demand for bitcoin less urgent, he added.
The recent surge in interest in bitcoin, sparked by a narrative that it can act as a hedge against inflation, has pushed the cryptocurrency to a record $ 58,354 and a market capitalization of $ 1 trillion.
But it has withdrawn more than $ 11,000 from those levels in the past week over questions about the sustainability of such high prices.
“There are a number of risks and obstacles that stand in the way of Bitcoin’s progress,” Citi analysts wrote. “But weighing these potential hurdles against opportunities leads to the conclusion that Bitcoin is at a tipping point.”
(Information from Thyagaraju Adinarayan and Tom Wilson; Editing by Hugh Lawson)
