Bitcoin Setback in China and Endorsement on Wall Street – NYTimes.com

Investors, Popular December 8, 2013 , by admin Comments Off 34

As China announces Bitcoin is not a currency for bank use in China, Bank of America Merrill Lynch issues a 14 page report suggesting the maximum value of Bitcoin has not been reached.

“We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers,” said the report by Bank of America currency strategists led by David Woo. “As a medium of exchange, Bitcoin has clear potential for growth, in our view.”

The report, which offered a primer on Bitcoin and described how it is “mined,” said that a “fair value analysis” of the currency suggested a maximum value of $1,300.

At the same time, however, Bitcoin has “considerable shortcomings which we believe will ultimately hinder it from ascending to international currency status,” the report said.

“Bitcoin’s role as a store of value can compromise its viability as a medium of exchange. Its high volatility, a result of speculative activities, is hindering its general acceptance as a means of payments for online commerce,” according to the report.

The Bank of America report comes on the heels of positive comments by United States government officials. Ben S. Bernanke, the Federal Reserve chairman, told Congress last month that currencies like Bitcoin “may hold long-term promise,” helping send the price higher.

Still, some monetary policy experts are skeptical. Unlike conventional currencies, Bitcoin is not backed by a central bank or government.

via For Bitcoin, a Setback in China and an Endorsement on Wall Street – NYTimes.com.