One thing we've learned while writing Citi GPS reports on disruptive innovations is the time it takes a new product to become widely used by global customers has decreased dramatically. According to Visual Capitalist, it took the telephone 50 years to reach 50 million customers, 22 years for television, seven years for the Internet and just 19 days for Pokémon Go. So it's not a surprise the uptake of Bitcoin in the past almost 7 years has been nothing but extraordinary. Not only has Bitcoin increased in usage and value (hitting $1 trillion in market capitalization in February 2021), but it has created a whole ecosystem around it — including crypto exchanges, crypto banks, and new offerings into savings, lending, and borrowing.
In the report attached, the authors note the biggest change with Bitcoin is the shift from it being primarily a retail-focused endeavor to something that looks attractive for institutional investors. In a search for yield and alternative assets, investors are drawn to Bitcoin's inflation hedging properties and it is recognized as a source of 'digital gold' due to its finite supply. Specific enhancements to exchanges, trading, data, and custody services are increasing and being revamped to accommodate the requirements of institutional investors.
Bitcoin is also evolving as the 'North Star' in the digital asset space and is a compass for the evolution of a broader ecosystem of crypto commerce. New innovations, including the announcement of fiat-backed stablecoins, used within public and private networks, may build pressure for central banks to consider their own digital currency options.
Where could Bitcoin be in another seven or so years? The report notes the advantage of Bitcoin in global payments, including its decentralized design, lack of foreign exchange exposure, fast (and potentially cheaper) money movements, secure payment channels, and traceability. These attributes combined with Bitcoin's global reach and neutrality could spur it to become the currency of choice for international trade.
There are a host of risks and obstacles that stand in the way of Bitcoin progress. But weighing these potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point and we could be at the start of massive transformation of cryptocurrency into the mainstream.Authors: Sandy Kaul,Richard Webley,Jonathan Klein,Shobhit Maini,Omid Malekan,Ioana Niculcea,