Bitcoin 'not seen as a currency for transactions' says expert
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The leading digital coin has endured a rough couple of months since it struck an all-time high in April of more than $63,000 (£45,320). Today it is trading at $32,575 (£23,560), which is down almost two percent from yesterday. The ongoing Bitcoin downside “correction” is similar to previous price activity, which has led some to tip the coin to soon rebound.
But a leaked report by Wall Street giant JPMorgan has warned that El Salvador’s controversial plan to adopt Bitcoin as legal currency could sidetrack those efforts.
They point to the token’s low trading volume outside of major exchanges and its extreme price volatility as possibly “a significant limitation on its potential as a medium of exchange”.
They added: “Daily payment activity in El Salvador would represent [around] four percent of recent on-chain transaction volume and more than one percent of the total value of tokens which have been transferred between wallets in the past year.
“A significant and rising fraction [of Bitcoin is] held by wallets with light turnover.”
The report pointed to Bitcoin trading volumes that commonly exceed $50billion per day but mostly happen on major crypto exchanges.
El Salvador president Nayib Bukele believes the adoption of Bitcoin as legal tender in September will boost financial inclusion among the country’s unbanked.
But JPMorgan researchers believe Bitcoin’s “high volatility” will be a major challenge alongside the country’s official dollarisation.
An estimated 2.3 million UK adults now hold cryptocurrency such as Bitcoin – despite warnings of the risks involved – according to the City watchdog.
The figure from the Financial Conduct Authority (FCA) represents a rise of 400,000 since last year and shows an enthusiasm for the assets.
It comes as after the Metropolitan Police seized a record £180million of cryptocurrency in London.
The Met’s economic crime command made the bust after following up intelligence received about the transfer of criminal assets. The investigation is continuing.
The FCA has previously warned investors of the risks that come with investing in cryptocurrency.
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They said: “If consumers invest, they should be prepared to lose all their money
“Some investments advertising high returns from crypto assets may not be subject to regulation beyond anti-money laundering.
“Significant price volatility, combined with the difficulties valuing [Bitcoin] reliably, place consumers at a high risk of losses.”
Express.co.uk does not give financial advice. The journalists who worked on this article do not own Bitcoin.
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