Tags: Bank of America | Bitcoin | Digital Currency | bofa

Bank of America Issues Positive Report on Bitcoin

By Dan Weil   |   Thursday, 05 Dec 2013 02:17 PM

Bank of America currency strategist David Woo issued a report conferring legitimacy upon the bitcoin digital currency Thursday.

Ironically, his commentary came the same day that the bitcoin plunged 11 percent — to $1,080 — after China's government announced a ban on trading of the currency by the country's banks.

As for Woo's report, obtained by Business Insider, "we believe bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers," he writes.

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"As a medium of exchange, bitcoin has clear potential for growth."

Woo even offers a target price for the currency — $1,300.

"Assuming bitcoin becomes (1) a major player in both e-commerce and money transfer and (2) a significant store of value with a reputation close to silver, our fair value analysis implies a maximum market capitalization of bitcoin of $15 billion (1BTC = $1,300)."

To be sure, "this suggests that the 100-fold increase in Bitcoin prices this year is at risk of running ahead of its fundamentals," Woo writes.

China's move addresses fundamental issues for the bitcoin.

"This is an industry that will need to be governed or regulated," Ron Cao, managing director at Lightspeed Venture Partners, which recently invested $5 million in BTC China, the world's largest bitcoin exchange, told Reuters.

"The safety and the well-being of the common user has to be taken into consideration. All this is expected." Chinese authorities' message is "this thing needs to be regulated at some point. We're studying it. Don't jump into it," Cao said.

Elsewhere, former Federal Reserve Chairman Alan Greenspan said bitcoin is a bubble after it surged 89-fold in a year and that the virtual money isn’t currency.

“It’s a bubble,” Greenspan, 87, said Wednesday in a Bloomberg Television interview from Washington. “It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of bitcoin is. I haven’t been able to do it. Maybe somebody else can.”

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