Even after weathering a bear market that wiped out more than 60 percent of the flagship cryptocurrency’s value, the bitcoin price continues to trade at a mark far above what its critics thought it could ever reach. Nevertheless, it still has a long way to go if it hopes to supplant the U.S. dollar or even become a viable tool for global payments.
That’s according to a new report from Swiss investment bank UBS, which found that the bitcoin price must reach $213,000 to replace the estimated $3.63 trillion worth of USD in circulation, commonly referred to as the M1 or “narrow money” supply.
At present, bitcoin has a circulating market cap of $127 billion, which is roughly the size of the M1 supplies maintained by the United Arab Emirates and Turkey. At its peak, bitcoin boasted a market cap larger than the M1 supplies of all but about 15 countries.
The report casts doubt on whether the bitcoin price can ever reach USD’s M1 valuation, arguing that the asset’s in its current form cannot sufficiently scale to accommodate the mass of new users who would need to join the network to justify a six-figure bitcoin price.
The bank specifically indicts Bitcoin’s on-chain transaction capacity, claiming that the network is “too unstable and limited” to be a viable payment instrument.
“Our findings suggest that Bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.”
This criticism is somewhat odd, though, since one would be hard-pressed to find anyone — even the most ardent of cryptocurrency enthusiasts — who would argue that bitcoin at its current valuation and level of technical development is a turnkey replacement for USD. Indeed, many bitcoin supporters tout it as “digital gold,” arguing that, at least for the foreseeable future, BTC will likely exist alongside fiat currency as a store of value before ultimately gaining utility for everyday payments.
At present, the network can handle a theoretical limit of seven transactions per second — at the blockchain layer, at least. However, while Bitcoin’s on-chain activity may never match Visa or Alipay, developers are building second-layer solutions such as the Lightning Network (LN), which are designed to move transactions off the main blockchain while still retaining its security.
Though still firmly in the testing phase, the LN can be used to make payments virtually instantly at almost no cost, and supporters are confident that developers will smooth out the kinks in this technological innovation over the coming months and years.