LONDON: Bitcoin rose nearly 6 percent on Monday as risk assets rallied after last week’s bond rout cooled, and Citi said the most popular cryptocurrency was at a “tipping point” and could become the preferred currency for international trade.
With the recent embrace of the likes of Tesla Inc. and Mastercard Inc., Bitcoin could be at the start of a “massive transformation” into the mainstream, Citi added.
Bitcoin, which has risen to $47,000 from $4,700 last March, could in the future become the preferred currency for international trade or face a “speculative implosion,” the investment bank said. It was up 5.7 percent at $47,834 on the Bitstamp exchange. Smaller rival ether rallied 7.5 percent to $1,525.
Bitcoin’s recent performance has come with the growing involvement of institutional investors in recent years, contrasting with its heavy retail investor focus for most of the past decade, Citi added.
If businesses and individuals gain access via digital wallets to planned central bank digital cash and so-called stablecoins, bitcoin’s global reach, traceability and potential for quick payments would see it “optimally positioned” to become the preferred currency for international trade, Citi said.
Bitcoin, designed as a payment tool, is little used for commerce in major economies, hampered by high volatility and relatively costly transactions.
Still, it has over the past year gained traction in some emerging markets such as Nigeria.
Such a dramatic transformation for bitcoin to the de facto currency of world trade — a status currently held by the dollar — would depend on changes to its market to allow wider institutional participation and closer oversight by financial regulators, Citi said.
Still, shifts in the macro-economic environment may also make the demand for bitcoin less pressing, it added.