Bitcoin Needs To Overcome Price Volatility To Be Considered Mainstream Money – UBS

News | August 3, 2018 By:

Switzerland-based investment bank UBS said that bitcoin needs to overcome price volatility and regulatory roadblocks before it can be considered a mainstream asset class.

In a new report, UBS said that for bitcoin to replace US money supply, its price must hit nearly $213,000, or its network’s processing capabilities would need to dramatically improve.

“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,” said UBS strategist Joni Teves. “Fixed supply and unusual demand dynamics make the system susceptible to high price volatility, in turn making it difficult for bitcoin to step into the role of money or to be a viable new asset class.”

According to UBS, bitcoin’s network can only process a fraction of the payment volume that companies like Visa handle. And that capacity constraint, inherent in the design of bitcoin’s network, could continue to limit the cryptocurrency’s usefulness.

Teves, howver, did not rule out the possibility that bitcoin could one day become a legitimate asset class. She said that if bitcoin can achieve scalability and regulatory support, it could one day become “a viable payment mechanism and/or a legitimate asset class in which even the most conservative and traditional investors can participate.”

Market research firm Chainalysis reported earlier this week that after peaking at $411 million in September 2017, the amount of money the largest 17 crypto merchant-processing services received in bitcoin has been on a steady decline, hitting a recent low of $60 million in May of this year. Chainalysis claims that the decline was due to price volatility in crypto markets.

“When the price is going up so rapidly last year, in one day you could lose $1,000 if you spent it,” said Kim Grauer, senior economist at Chainalysis. “What’s more, high transaction fees have made paying for small-ticket items like coffee with bitcoin impractical.”