Bitcoin is at an inflection point, says Citi Bank: mainstream adoption or speculative implosion?
According to a report by investment bank Citi, Bitcoin (BTC) has two options for its future: mainstream adoption or speculative implosion.
Global investment bank Citi has published a report on the current and potential future status of Bitcoin (BTC). In it, the leading cryptocurrency is described as the „North Star“ of innovation.
Perception of Bitcoin (BTC) is the name of the game
The report makes several claims about Bitcoin’s potential. One of the most important observations is that BTC is already entering the mainstream. The reason for this assertion, it says, is the fact that an increasing number of businesses are already accepting Bitcoin. The report also notes that Bitcoin’s base is significantly Bitcoin Circuit App different from 2017, when BTC was traded almost exclusively as a retail asset.
The report also suggests that Bitcoin could be the currency of choice for future international trade. It points to the cryptocurrency’s global reach, borderless design and lack of foreign exchange risk as key features that could drive this phenomenon.
But the most important factor influencing whether Bitcoin becomes the currency of choice for international trade is perception. According to the report, the perception of Bitcoin moved from a focus on technology to a focus on the cryptocurrency’s ability to withstand censorship and finally to a focus on scarcity. In the future, the focus may shift to Bitcoin’s „globality“ and value exchange networks, which the report says would be the point at which Bitcoin could be seen as a tool that facilitates global trade. The report states:
‚Bitcoin is becoming the de facto ‚North Star‘ of the digital asset space, with its development seen as a compass for the development of the broader ecosystem.
BTC benefits from improved infrastructure and blockchain technology
Bitcoin will also benefit from advances in blockchain technology and its increasing use. Blockchains are already being used in ways that go beyond Bitcoin and cryptocurrencies in general. These efforts, the report says, validate Bitcoin’s underlying technology and could bring it into the mainstream.
In addition, the report suggests that Bitcoin and other cryptocurrencies are becoming increasingly intertwined with the traditional fiat currency system. When Bitcoin was first traded, it operated outside the traditional financial system. Fiat currencies were converted in and out of the crypto market, but that is also changing now.
With PayPal’s decision to add Bitcoin to its platform in 2020, it is now much easier to see how Bitcoin will be further integrated into traditional finance. All the user has to do is choose to make a payment in Bitcoin and PayPal will handle the rest of the transaction. This is a significant improvement in the ability to move money between the two ecosystems.“
Potential roadblocks to Bitcoin’s success
However, despite some more optimistic assessments of Bitcoin’s future, the Citi report also addresses some of the biggest obstacles Bitcoin could face.
One of these obstacles is the risk that other cryptocurrencies could overtake and displace BTC. In support of this view, the report points to the fact that Bitcoin’s market capitalisation increased by 2.70 times in 2020, but the market capitalisation for altcoins increased by 3.75 times over the same period.
This means that Bitcoin’s dominance of the crypto market is declining. In 2019 it was still at 69%, but in 2020 it will only be at 62%. A trend that could continue over the next few years.
Bitcoin could also fall victim to the evolving macroeconomic environment. The report suggests that one of the reasons institutional investors buy Bitcoin is because they are convinced it is a hedge against inflation and currency devaluation.
Concerns about inflation have intensified during the COVID-19 pandemic, but the world’s largest economies are showing signs of recovery, according to the report. China showed positive economic growth in 2020 despite being the epicentre of COVID-19. The report says this growth could siphon off interest in Bitcoin as investors shift capital back into traditional markets.