Bitcoin purists assert that the top-ranked cryptocurrency is both a store of value and a medium of exchange. Thus, it can function as a mainstream currency, maybe even supplanting the U.S. dollar as the currency of the global economy as predicted by the likes of Jack Dorsey and Steve Wozniak.
Bitcoin Needs to Trade at Over $200,000 to Replace U.S. Money Supply
However, despite the enthusiastic projections of BTC proponents, UBS believes that Bitcoin is still a long way away from replacing the U.S. dollar. In fact, Bloomberg reports that the multinational bank isn’t completely sold on the viability of BTC as an asset class.
According to a recent report published by UBS, Bitcoin would have to trade at $213,000 to replace the dollar. BTC’s all-time high currently stands at $19,500—a milestone achieved in mid-December 2017. To reach such a price level, BTC would have to enter into the regions only dreamed of by BTC permabulls like John McAfee and Tim Draper.
BTC is currently struggling to maintain the $7,400 support level and only briefly rallied to $8,400 in late July. Since the beginning of the year, Bitcoin has been unable to reach the stellar heights its set in late 2017. The top-ranked cryptocurrency is down by almost 60 percent since the start of 2018.
Bitcoin is “Unstable and Limited”
As part of its 37-page report, UBS also declared BTC to be unsuitable for currency operations on account of its volatility. A portion of the report reads:
“Our findings suggest that Bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.”
According to UBS strategist Joni Tevez, dramatic price swings and issues with the technology are a major limiting factor to BTC’s utility as a currency. Tevez also revealed that despite the apparent logarithmic growth of BTC, it has only marginally outperformed traditional stocks when a risk-adjusted analysis was conducted.
In another recent study, this time by Chainalysis, it was revealed that Bitcoin’s use in commerce had declined significantly since September 2017.
Transaction Capability is Not Robust Enough
Another sticking point that derails BTC’s bid as a dollar substitute is the transaction capability of its blockchain network. Scalability remains a prominent issue for commercial blockchain networks, including Bitcoin. Commenting on the problems caused by scalability, Teves said:
“Bitcoin cannot handle the volume of transactions processed by mechanisms being used in the real world.”
Despite its apparent failings so far, UBS still accepts that BTC is a legitimate payment means which can only become more trusted with improved regulations.
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