Daily Management Review

Citi Says In Case Of Bitcoin Tripling In Value, Governments May Start To Act Against It


12/28/2017




The peak value of bitcoin could likely be determined by government action against it when prices of the cryptocurrency value triples even though it is difficult to say when and how high the value of bitcoin would rise, said Citi analysts to its clients. 
 
Citi argued that crypto-currency cannot be considered to be a 'means of transaction' or as 'a store of value' which are the two primary properties for any currency by stating that the cryptocurrency was inherently very volatile which is about seven times that of emerging market currencies or gold.
 
And even as the price of bitcoin is seemingly poised to rise further, there are allegations that cryptocurrency is also exceptionally "wasteful" because according to some recent reports, power that is equal to the consumption of all of Denmark is being used up in the mining of the cryptocurrency
 
Citi also argued that governments may also outlaw it on the basis of such waste.
 
There are some economies like Russia, Nigeria and New Zealand where the value of bitcoin transactions as a proportion of the gross domestic product is rising and hence there are concerns being expressed about what would happen to such economies if bitcoin fails at least hypothetically. Additionally, the role that is played by the cryptocurrency in the informal, is another reason why governments could decide to act.
 
Ukraine, Kenya, South Africa and Colombia are the other economies that have a high degree of Bitcoin holdings as a part of their GDPs, Citi noted.
 
In the list of the countries where bitcoin is a friendly way of transactions is Britain with 2% of bitcoin transactions as part of the total GDP.
 
To stress the importance of what it was trying to state, Citi put forward the example of the bursting of the ‘Dotcom’ bubble and the negative impact it had on the wealth of people invested in it. There was an approximate drop of 20% of GDP in the market capitalization of stocks that were listed in the US between March 200 and the beginning of the recession in March of 2001, set due to the bursting of the 'Dotcom' bubble.
 
"If bitcoin were to flop, those countries would already experience a meaningful negative wealth effect. On the other hand, for the US it is very low at 0.17%.
 
"Another tripling of bitcoin prices from the highs (to $60,000) may focus minds of authorities. But are the potential wealth effects outlined above enough to compel policy makers in the at risk countries to move against bitcoin?," the analysts said.
 
The investment bank further said that private keys could likely be replicated from public keys at some point in time because of the emergence of quantum computing.
 
"Even in the best case outcome this is at the very least likely to lead to additional forks. While quantum computing may not be the end of bitcoin, at the very least it introduces further risks that make bitcoin not well suited to become a widely adopted currency, rather than just a highly speculative plaything."
 
(Source:www.digitallook.com)






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