According to the research report from Goldman Sachs, Bitcoin’s potential as an alternative currency is strongly overrated, but it might have a future as a payment technology.
The problem with adoption of Bitcoin as an exchange medium is pretty difficult, because it has not a very good and reliable store of value. In spite of this, the popularity of Bitcoin as a mean of payment for products and services is rapidly growing. It was reported by analysts Dominic Wilson and Jose Ursua. Plus to that, Head of Goldman Sachs commodities research Jeff Curie believes bitcoin’s attributes make it a commodity, but not a currency.
This position is supported by Eric Posner, who works for the University of Chicago. He excludes digital currencies as a credible alternative to fiat currencies. He insists that government control of the money supply is obligatory and guarantees the stability of economy.
On the other hand, Goldman IT services analyst, Roman Leal, maintains that cryptocurrencies network, Bitcoin in particular, successfully evades money transfer hurdles traditional banking systems face by making it cheaper and simpler, especially when it comes to transnational operations.
Leal argues that the greatest obstacle for Bitcoin is in encouraging these advantages as traditional payment players reduce their profit margins and potentially co-opt the technology.
“While it is too early to tell how banks and payment processors will react to the threat of Bitcoin, we believe that it is only a matter of time before major incumbents develop a digital currency strategy,” Leal said.
Meanwhile, the volatility of Bitcoin increases in compare to other currencies by an order of magnitude. According to Goldman Sachs, Bitcoin volatility is approximately 108,1%. And that is 20 times higher than major national currencies, e.g. euro or dollar. Because of that volatility remains the biggest concern. By the way, Goldman Sachs researchers used CoinDesk data to measure volatility of Bitcoin.
In general, the report simply replicates the argument that bitcoin is more likely able to complement fiat currencies rather than replace them. There is also the idea that this cryptocurrency could become a viable and cost-effective payments platform.