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One of the many digital assets under the umbrella term known as cryptocurrency, Bitcoin has become history’s most polarising asset after the tulip in the mania of the 1630s. Economists at DBS Bank try to gauge the obstacles in having exposure to such a novel asset class.

See –  Three opportunities that Bitcoin brings – DBS Bank

Three views in opposition to Bitcoin

“Low transaction speeds – a scalability problem. The Bitcoin blockchain can guarantee only around 4.6 transactions per second, a far cry from the more than 1,700 per second that Visa contends to accomplish on average. Bitcoin, functioning as a currency, appears to run up against a currency ‘impossible trinity’ of being a unit of account, a means of transaction, and a store of value (any currency at best only embodies two out of three); even as it could improve as a store of value vs other fiat currencies, it currently pales in comparison as a means of transaction.”

“High price volatility – a poor unit of account. Observing the price movement of Bitcoin in the last three years alone – a range of USD3k to USD63k per BTC – would be sufficient to conclude that it would be a poor substitute for money as a unit of account for goods and services. The daily price volatility of Bitcoin exceeds most Emerging Markets currencies, and exceeds even high beta commodities such as crude oil and silver.”

“Regulatory uncertainty – Risk of unfavourable legislature. Authorities unlikely to allow Bitcoin to threaten their monopolistic control over currency, with actions related to heavy taxation and delegitimization a potential scenario.”

 

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