Bitcoin has “clear potential for growth” and could become a major means of payment for online transactions and money transfers, a Bank of America analyst told CNBC on Thursday.
The digital currency could hit a market capitalization of $15 billion on its way to becoming similar to a store-of-value commodity like silver, David Woo said in a CNBC interview.
On Thursday, the People’s Bank of China outlawed the country’s banks from using it, leading some to cash in on their investments. Bitcoin value went down 20% as a result.
David Woo, head of global rates and currencies research, valued an individual bitcoin at $1,300 at his maximum market capitalization. According to bitcoin exchange Mt.Gox.com, prices were above $1,000 Thursday afternoon.
Woo said the estimated market capitalization was an “upper limit” on his bitcoin forecast, and would only happen if the digital currency crosses three thresholds:
1) It becomes 10 percent of business-to-consumer online transactions
2) one of the top three means of money transfers
3) a commodity similar to silver.
“There’s no question that bitcoin has some inherent risk,” Woo said. “But I think we also need to recognize the fact that bitcoin does have a role to play in countries where its citizens face high taxes, capital controls or even high confiscation risk. This is why China has seen massive growing demand for bitcoins.”
Woo played down fears that bitcoin could fuel an underground economy of illicit drugs and untraceable transactions. Bitcoins, which are complex lines of code, contains a built-in code that produces a digital—and public—footprint, he said.
“From that point of view, I don’t think bitcoin could become a big story in the criminal underworld,” Woo said.