UBS says bitcoin must hit $213,000 to challenge money supply

August 03, 2018
Chris Wheal

Bitcoin would have to hit a price of around $213,000 if were ever to challenge US money, said a report from Swiss investment bank UBS on Friday.

UBS report suggests bitcoin would have to hit $213,000 to replace money supply

UBS said that, despite being the world’s biggest cryptocurrency by market capitalisation, bitcoin can’t even be considered a viable asset class: while its price remains so volatile it is not an effective store of wealth.

Slow processing

The report said it would be many years before bitcoin could supplant US money supply – which includes paper notes, travellers’ cheques and credit cards – and its price would have to reach stellar levels above $200,000 to make up for its network’s slow processing capabilities.

Indeed, the Bitcoin Network is among the slower of the blockchain systems. Compared to payment companies such as Visa, which can handle around 1,700 transactions per second, Bitcoin’s system can only process 3-4 transactions per second.

“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 report added.

Bitcoin payments slow

Research published by Bloomberg on Thursday showed that the use of bitcoin in payments has slowed rapidly over the past year.

After peaking at $411m in September 2017, the value of bitcoin transactions at the largest 17 merchant-processing service providers hit a low of $60m in May.

The UBS report said that cryptocurrencies remained a niche investment, and that it would need a far more liquid market and the participation of institutions before prices would become stable enough to be considered an asset.

It added: “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.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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