Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

5 Key Takeaways From Bank Of America’s Bitcoin Report

By Crypto BriefingCryptocurrencyMar 21, 2021 01:36AM ET
www.investing.com/analysis/5-key-takeaways-from-bank-of-americas-bitcoin-report-200568530
5 Key Takeaways From Bank Of America’s Bitcoin Report
By Crypto Briefing   |  Mar 21, 2021 01:36AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

While Citibank praised Bitcoin’s potential, analysts at Bank of America published a damning indictment of the biggest cryptocurrency. They do, however, see much more promise in DeFi.

Bank of America (NYSE:BAC) Bearish on Bitcoin

1. Central Bank Digital Currencies Will Replace Bitcoin

Several central banks are actively working on CBDC, with countries such as China and the UAE even preparing inter-operability between their national digital currencies. Bank of America described the move as “defending their territory from cryptocurrencies,” suggesting that CBDCs would quickly replace private cryptocurrencies whose use could be restricted.

After heavy restrictions, BoA adds that citizens will turn to CBDCs as they provide users with governmental backing and a far less volatile asset.

2. Bitcoin Is Still Too Volatile

According to Bank of America, Bitcoin should have already reached maturity as an asset. As witnessed during last March’s COVID crash, the massive swings in value suggest that Bitcoin can’t be a store of value.

The firm writes that Bitcoin’s volatility is higher than forex, gold, or silverand shows no sign of slowing down as 2021 is the second most volatile year to date.

3. Bitcoin Is an Environmental Disaster

The price of Bitcoin is directly correlated to its energy consumption, BoA analysts argue. “Should prices rise to $1mn, Bitcoin may turn into the world’s 5th largest emitter, surpassing Japan.”

This is a very debatable claim as the truth about the environmental impact of Bitcoin is much more complex and not as directly correlated to price.

4. Whales Dominate Crypto

BoA reports that 2.4% of addresses hold 95% of the Bitcoin supply while the rest are mostly empty, comparing this to the top 1 percent of Americans who hold 30% of all household wealth.

This number fails to consider that a majority of investors do not hold their own Bitcoin but often trust exchanges to do so.

The issue of calculating Bitcoin concentration through this metric is that one address isn’t necessarily one person. In the 2.4% number, these addresses can hold the funds of thousands of customers. This can work both ways as, similarly, there is no limitation of the accounts that one person can open. An active trader might use several addresses and leave some empty, for instance.

On-chain analytics firm Glassnode estimates the amount of Bitcoin held by each category of Bitcoin holders as the following (the numbers on the left represent BTC holdings):

Estimated Distribution Of Bitcoin Supply Through Individuals
Estimated Distribution Of Bitcoin Supply Through Individuals

5. Bitcoin Doesn’t Scale

BoA compares Bitcoin’s total output of roughly 300,000 transactions per day to Visa's (NYSE:V) stated 236 million transactions per hour. As trading is supported by mining to ensure the settlement process, the Bitcoin network’s speed will always be capped, limiting its potential to scale.

This fails to take into account the effort to develop Bitcoin’s second layer through projects like Lightning Network, which effectively allows infinite transactions per second, limited only by the speed and capacity of nodes.

Additionally, Bitcoin transactions and Visa's (NYSE:V) transactions are very different, and people do not use them for the same type of transactions.

In Citibank’s report, their analysts argued that comparing Bitcoin and Visa transactions was akin to comparing international trade transfers and buying cups of coffee. The two networks are used for very different purposes, and the value proposition of a decentralized blockchain network was not the same as a credit card company, nor does it pretend to be.

Bank of America Bullish on DeFi

Despite the scathing analysis of Bitcoin, the bank suggested that DeFi could “potentially be more disruptive than Bitcoin.”

According to their analysts, while the DeFi space still has a long way to go, it could challenge centralized financial institutions in the long term. They still highlight the issue of scalability on the Ethereum blockchain, something that developers are working hard on for the release of Ethereum 2.0.

Original Post

5 Key Takeaways From Bank Of America’s Bitcoin Report
 

Related Articles

Jason Sen
Cryptos Daily Forecast By Jason Sen - Jun 11, 2021

Bitcoin bottomed exactly at the downside target and key support at 31100/3000. An easy 6000 pips on our shorts before the bounce to first resistance at 36200/36700. A sell...

Crypto Briefing
Bitcoin, Ethereum Flows Show Signs Of Accumulation By Crypto Briefing - Jun 11, 2021

On-chain analysis shows that Bitcoin and Ethereum experienced significant buying action on Wednesday. Bitcoin and Ethereum surged yesterday, buoyed by the largest daily outflow...

5 Key Takeaways From Bank Of America’s Bitcoin Report

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email