Bitcoin will be niche asset for tech nerds in long term says ING bank analyst Teunis Brosens

Bitcoin will retreat from its boom to become a niche asset, according to an analyst at a leading bank.

As bitcoin closed in on $20,000 with the launch of bitcoin futures pushing the cryptocurrency higher, principle economist at ING Teunis Brosens warned that the current high valuations are “based on shaky foundations” in a research note on Monday morning.

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“Nobody can forecast the future, but our current thinking is this: one day, beyond the hype, bitcoin will return to being the thriving niche product that it was in its initial years. Users will include tech nerds, people obsessed about their privacy, people afraid for (hyper)inflation in traditional currencies, and people wanting to circumvent central banks for ideological or criminal reasons,” he said.

When considering the value of bitcoin, Brosens said that it could be worth zero if interest wanes because nothing is backing it, or, it could be worth the equivalent of $1.7m today if it were to eventually replace all narrow money, signalling is unknown quantity.

But there are several things holding it back from a mass audience, he said, regulation, a lack of intermediary, scalability, volatility and energy use.

Read more: Bitcoin futures being considered by Deutsche Boerse

“Bitcoin proponents argue that volatility will fall as Bitcoin adoption increases. That may be the case. Yet bitcoin remains money with fixed supply, lacking a central bank to manage price stability,” he said.

“These are a number of serious impediments that are likely to prevent bitcoin from becoming a serious mainstream contender to existing payment systems in the short to medium term – at least in developed economies which have highly efficient and low-cost systems in place. In economies where payment systems are less well developed, bitcoin has more potential.”