BY CNA team - August 3, 2018
A long way to replacing fiat
Bitcoin supporters may have to wait quite a while before the cryptocurrency replaces US money supply.
UBS, a Swiss investment bank, says in a report that bitcoin cannot be considered money or even a viable asset class yet, Bloomberg noted.
The Basel-based investment bank says that for bitcoin to replace the US money supply – cash, deposits and bank accounts – the cryptocurrency would need to hit nearly US$213,000 or its network processing capabilities would need to improve.
As at June 30, US money supply, as measured by M2, stood at US$14.11 trillion. The bitcoin network can process between four and six transactions per second or 10 minutes for a transaction to be approved.
According to Visa on its website, VisaNet handles an average of 150 million transactions every day, which works out to 1,667 transactions per second. Theoretically, the network can handle more than 24,000 transactions per second.
UBS says the capacity constraint, inherent in the design of the bitcoin network, could limit the cryptocurrency’s usefulness.
“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,” the investment bank says.
It did not discount cryptocurrencies becoming an alternative asset class but their prices are likely to remain highly volatile, appealing more to speculative investors. It found that speculation drove more than 70% of the change in bitcoin prices.
Earlier, Chainalysis produced a report for Bloomberg showing that bitcoin’s use for payments of goods and services has fallen since peaking last September.