The largest cryptocurrency in the world, Bitcoin, climbed back up to above US$48,000, following a Citi report suggesting the digital currency has the potential to become the preferred currency for international trade.
According to the report, Citi predicts that Bitcoin’s recent price rally was the result of growing involvement of institutional investors, many of which have been in search of alternative assets and higher returns— compared to the significant retail investor focus that has dominated the cryptocurrency over the past several years. The recent embrace of Bitcoin by prominent names including Mastercard, Tesla, and Square, could be the beginning of a “massive transformation” towards a mainstream adaptation.
However, Citi also notes that a number of persistent issues with Bitcoin still remain, which will likely continue to inhibit the cryptocurrency’s widespread adoption for the time being. “For institutional investors, these include concerns over capital efficiency, insurance and custody, security, and ESG considerations from bitcoin mining. Security issues with cryptocurrency do occur, but when compared to traditional payments, it performs better,” the bank added.
Citi also pointed out that in the event that individuals and businesses get access to central bank digital cash and stablecoins, then Bitcoin’s reach on a global scale, traceability, and quick payment potential, could put the digital currency in a favourable position to become the “currency of choice for international trade.” On the other hand though, such a dramatic transformation of Bitcoin becoming the currency of choice for global trade would largely depend on the market allowing increased institutional participation and more oversight by financial regulators.
Information for this briefing was found via CitiGroup. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.