Analysts at Bank of America have attacked bitcoin as “exceptionally volatile” and “impractical” in a 17 March research note.
In the note, the analysts said there was “no good reason to own bitcoin unless you see prices going up”.
The analysts said the supply of the cryptocurrency was by design artificially constrained so demand swings are key to price moves.
Bitcoin has slipped from a record high price of $61,000 on 14 March to $55,357 on 17 March at 1.30 GMT, according to data from crypto exchange Bitstamp.
Bitcoin’s exceptional volatility makes it “impractical as a store of wealth or payments mechanism,” the bank’s analysts said.
“The main portfolio argument for holding bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on bitcoin demand outpacing supply,” the note said.
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The research also criticised bitcoin’s environmental credentials saying that its network emits about 60 million tons of CO2 per year, which it said was the same as Greece. Further price rises could send bitcoin emissions soaring further, the researchers said.
On social and governance issues, the report said democratisation of money and anonymity of ownership can be positive as they help in territories with corrupt financial systems and lower costs by eliminating intermediaries.
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“But negatives outweigh,” the analyst said, arguing that anonymity “aids nefarious activities”.
The note cited research by ESG tracker Reprisk which found 181 companies faced risks linked to bitcoin around money laundering, corruption, bribery, fraud, and breaches of data privacy.
Bank of America’s stance on bitcoin contrasts with that of other major banks such as JPMorgan which has said that bitcoin could compete with gold as a safe-haven asset in the long term.
Goldman Sachs’ head of digital assets Mathew McDermott told Financial News that cryptos were going to be a permanent feature of banks and asset managers’ investment portfolios.
“We’ve crossed the line now,” he said. “The focus will become broader and so there’ll just be different reasons for why you’d want to be involved with different cryptocurrencies, because of the underlying technology that’s coming.”
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