The sharp rise in the bitcoin price over the past year is a good indication of the growing interest among investors in the current cryptocurrency market leader. The strong performance of the digital currency hasn’t gone unnoticed in the analyst circles, with some financial experts forecasting further price gains for the asset.
However, according to MarketWatch, at least one major Wall Street bank remains sceptical about bitcoin’s prospects.
A team of Morgan Stanley analysts led by James Faucette yesterday released a scathing report on bitcoin, suggesting that the market is driven by value speculation and questioning potential of the cryptocurrency as a legitimate currency. The analysts noted that bitcoin is accepted at just three of the top 500 online merchants tracked by the e-commerce news and analytics publication Internet Retailer, down from five last year.
“The disparity between virtually no merchant acceptance and bitcoin’s rapid appreciation is striking,” Faucette wrote in the report.
The analyst blamed the lack of bitcoin’s appeal for retailers on a number of factors, including higher costs and slow transaction times. But the main culprit appears to be the reluctance of bitcoin owners to use the cryptocurrency for payments.
“Bitcoin owners are reluctant to use the cryptocurrency given its rate of appreciation, more evidence that bitcoin is more asset than currency,” Faucette said. "Way easier to trade speculatively than convince new merchants to accept the cryptocurrency."
Atlantic Financial founder Bruce Fenton touched upon the same issue in an interview with Bloomberg last month. He said that some cryptocurrency owners no longer see the point in using bitcoin for small purchases given increased transaction fees.
Still there are some examples of a growing adoption of bitcoin payments. Jonathan Johnson, member of Overstock.com Inc’s board, said in May that the number of bitcoin transactions on the company’s website had actually tripled since it introduced the digital currency as a payment method in 2014. Overstock brings in "as much as $5 million per year" from bitcoin, Johnson told Bloomberg at the time.