According to strategists from Goldman Sachs, Bitcoin theoretically has the potential to become a legitimate currency. The key functions that Bitcoin can serve really well are already fully developed in currencies across the developed world, so it has a few common aspects in that sense.
In a note on Wednesday, Goldman’s Zach Pandl and Charles Himmelberg said:
“The widespread use of the dollar outside the US — and full dollarization in some countries — suggests there is already demand for an internationally accepted medium of exchange and store of value.In those countries and corners of the financial system where the traditional services of money are inadequately supplied, bitcoin (and cryptocurrencies more generally) may offer viable alternatives.”
According to strategists, regions where there is a dissatisfaction with the existing monetization are the ones where the demand for cryptos is at its highest. In 2016, after China started restricting capital outflows, the Bitcoin exchange volumes surged as can be seen in the graph below.
Considering this perspective, Bitcoin could potentially be used to make transactions.
However, as part of a currency portfolio, the strategists said that cryptocurrencies are “more consistent with a classic speculative bubble,”. Importantly, analysts observed that two of the countries with a high Bitcoin exchange volume, Korea and Japan, also have a stable monetary system.
There are still issues with the regulation of cryptocurrencies as governments are not able to see and track the payments or transfers that use digital currencies. And as traders well know, the volatility seen in the value of cryptocurrencies is rarely seen with fiat currencies. This volatility makes them unsuitable as stores of value.