Fri, August 19, 2022

What do Wall Street banks think about Bitcoin’s rally?


Bitcoin has reached record highs in recent weeks. After several major tech companies expressed interest in investing in cryptos and even accepting them as a payment method, the Bitcoin price surged amazingly high, surpassing $60,000 at one point.


The digital coin jumped by 300 percent last year. It also skyrocketed above $50,000 in the opening weeks of 2021 and continued rising, almost doubling in the last months.


According to estimations, there are 18.7m Bitcoins in circulation. That means the overall value of the market to approximately $1.1tn. Investment banks can’t ignore the crypto market when it reaches such proportions.


However, Wall Street analysts differ in opinion when it comes to Bitcoin and other crypto-assets. Despite extra scrutiny from professional analysts, Wall Street hasn’t reached a consensus about cryptos’ place in financial markets or whether they should even have one at all.


Citigroup was the first major bank, which began discussing the cryptos. According to it, Bitcoin may have sufficient potential to become the preferred currency for global trade.


However, Citigroup also expressed concerns about security, capital efficiency, custody, and insurance, as well as the environmental impact of cryptocurrencies. The bank thinks that developments in the near term will probably prove decisive. This is due to Bitcoin balancing at the tipping point of speculative implosion and mainstream acceptance.


What do Morgan Stanley Wealth Management and Bank of America say on Bitcoin?


Morgan Stanley Wealth Management stated that cryptos are nearing the threshold of becoming an investable asset class. Lisa Shalett, the head of the global investment office at Morgan Stanley, noted that growing interest from institutional investors, improving liquidity conditions, and the evolving regulatory framework have created conditions for digital coins to become part of mainstream institutional portfolios. This process is similar to how gold markets emerged some 45 years ago.


Shallet advised investors to get educated. They should consider whether, or how to get exposure to this new asset class in their portfolio after having a sufficient understanding of the cryptos.


Meanwhile, Bank of America’s global commodity research team announces that this year’s total Bitcoin returns are already among the highest in the crypto’s short history. Despite that, their report highlighted serious concerns about the cryptocurrencies’ environmental impact. They noted that bitcoin’s annual energy consumption rivals that of the Netherlands as mining of new coins is an energy-intensive process.


Besides, BofA analysts highlighted that Bitcoin’s supply is controlled by a small collection of accounts. They add that it is not a suitable hedge against rising inflation.


Meanwhile, U.S. Federal Reserve chair Jerome Powell declared that cryptocurrency assets are more for speculation than for payments.


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