Citi believes bitcoin is near a “tipping point” and might soon “become the currency of choice for trade” as companies like Paypal and Tesla warm to it and banks explore digital currencies.
“There are many risks and problems that are in the way of Bitcoin’s progress,” the U.S. bank’s global perspectives team declared on Monday.
“Its future is still known, but developments in the short term might prove decisive as the currency balances on a tipping point of mainstream adoption or speculative collapse.”
This marks a change for major institutions on the digital currency. Many banks have shunned Bitcoin, saying it has no value and that the hype is like the tulip mania of hundreds of years ago.
But bitcoin’s incredible climb over the past months has forced Wall Street power players to rethink cryptocurrency. BNY Mellon last month announced it would offer custody services for Bitcoin and other cryptos. Meanwhile, JPMorgan has also said it is looking at bitcoin.
There are several hurdles bitcoin must overcome before reaching mainstream adoption, according to Citi.
“Institutional investors entering the market has given more confidence in cryptocurrency but there remains issues that might limit widespread adoption,” Citi stated.
“For larger investors, these include capital efficiency, custody, insurance and security,” the bank added. “Security issues with crypto do exist, but compared to traditional payments, it is more secure.”
Just last month, JPMorgan analysts labeled Bitcoin a “side show” and said crypto was the “worst hedge” against large stock price downturns. The rise of demand for digital alternatives is the “real story of the Covid era,” they said.