Opportunity and risks
Citibank analysts said that Bitcoin is about to become the world’s “currency of choice” for global trade and that the asset has reached its “tipping point”, according to a research report for customers on Monday.
Citibank have released a 106-page report on #Bitcoin.
BTC’s attributes “could spur it to become the currency of choice for international trade…. Bitcoin is at a tipping point and we could be at the start of a massive transformation of cryptocurrency into the mainstream.” pic.twitter.com/i8lrpxn5Ha
– Bloqport (@Bloqport) March 1, 2021
Citibank released a 106-page report on #Bitcoin.
The attributes of BTC “can stimulate you to become the currency of choice for international trade … Bitcoin is at a critical point and we may be at the beginning of a massive transformation of cryptocurrency in the market”.
This occurs after banks (among many others) step back when it comes to supporting Bitcoin or extending crypto-to-fiat services and vice versa to customers. But the new research shows a change in sentiment.
“Short-term developments are likely to be decisive, as the currency is balanced at the tipping point of mainstream acceptance or a speculative implosion,” said the bank, suggesting that the current macro landscape could create a positive backdrop for the adoption of digital currency.
However, Citibank added that Bitcoin’s future was still uncertain and that there were “a number of risks and obstacles” that hindered BTC’s progress.
“The entry of institutional investors has sparked confidence in the cryptocurrency, but there are still persistent problems that can limit widespread adoption,” he noted.
The bank added that, for institutional investors, these issues included concerns about capital efficiency (from deploying fiat to Bitcoin before other options), insurance, custody and security of any Bitcoin held and the various environmental concerns related to Bitcoin mining – the computational process by which a new Bitcoin is generated.
Still, the bank says that cryptocurrencies are a better bet than traditional payments in terms of security.
“Cryptocurrency security issues do occur, but when compared to traditional payments, performance is better,” he said.
Citibank: Why are institutions buying Bitcoin?
Citibank asked cryptocurrency proponents and legacy financial bankers why they felt there was a sudden influx of crypto assets. Here is the general consensus:
“There may be a relatively lesser-than-normal risk in public markets due to government support, which, in turn, frees investors to employ more venture capital.”
Respondents explained that the ability to allocate large amounts of venture capital to private markets was constrained by “high dry powder reserves”, but in this context, there is an increasing need for protection against inflation. “
They said it was a combination of these perceptions that prompted many investors to look further to find opportunities, in addition to Bitcoin’s views as a potential source of “digital gold” due to its finite supply of 21 million coins.
“Just as precious metals like gold are seen as scarce in the physical world, Bitcoin’s digital scarcity is seen as a potentially equivalent value proposition,” said industry observers.
The bank further noted that many respondents hypothesize that the finite availability of Bitcoin contrasts sharply with the elastic supply of sovereign money and government incentives to print money to cover rising public debt – a point that causes an additional influx of funds to the asset.
Bitcoin, currently ranked first by market cap, has risen 8.03% in the last 24 hours. BTC has a market capitalization of $ 900.09 billion with a 24-hour volume of $ 54.26 billion.