LONDON (Reuters) – Bitcoin rose nearly 6% on Monday, with risky assets rebounding after last week’s bond collapse, and Citi said the most popular cryptocurrency is at a “tipping point” and it can become the preferred currency for international trade.
With the recent embrace of companies like Tesla Inc and Mastercard Inc, Bitcoin could be at the beginning of a “massive transformation” for the mainstream, Citi added.
Bitcoin, which rose to $ 47,000 from $ 4,700 last March, may in the future become the preferred currency for international trade or face a “speculative implosion”, the investment bank said.
It rose 5.7% to $ 47,834 at 1127 GMT on the Bitstamp exchange. The lesser rival ether rose 7.5% to $ 1,525.
Bitcoin’s recent performance has come with the growing involvement of institutional investors in recent years, in contrast to its strong focus on retail investor for most of the past decade, Citi added.
If companies and individuals gain access through digital wallets to the central bank’s planned digital money and so-called stablecoins, the global reach, traceability and potential for fast bitcoin payments would see it “perfectly positioned” to become the preferred currency for the international trade, said Citi.
Bitcoin, designed as a payment tool, is little used for trade in major economies, hampered by high volatility and relatively expensive transactions. Still, over the past year it has gained strength in some emerging markets, such as Nigeria.
Such a dramatic transformation of bitcoin into the de facto currency of world trade – a status currently held by the dollar – would depend on changes in its market to allow for broader institutional participation and closer supervision by financial regulators, Citi said.
Still, changes in the macroeconomic environment could also make demand for bitcoin less pressing, he added.
The recent rise in interest in bitcoin, triggered by a narrative that it can act as a hedge against inflation, has led the cryptocurrency to a record high of $ 58,354 and a market capitalization of $ 1 trillion.
But it removed more than $ 11,000 from those levels last week for 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,” wrote Citi analysts. “But weighing these potential obstacles against opportunities leads to the conclusion that Bitcoin is at an inflection point.”
(Graph: Bitcoin increase from the March lows š
Reporting by Thyagaraju Adinarayan and Tom Wilson; Editing by Hugh Lawson