Bitcoins, the virtual currency that fell by more than half after surging past $1,100 last year, are probably one to three years away from broader adoption that will challenge industries, Wedbush Securities Inc. analysts wrote.
Venture-capital investments in bitcoin businesses have doubled in less than three months, and programmers are bolstering security, the analysts, Gil Luria and Aaron Turner, wrote in a research note yesterday. As bitcoins catch on, they will cut into more than $300 billion in revenue generated by global payments and challenge industries that account for about 20 percent of U.S. gross domestic product, the analysts said.
“The disruption from bitcoin will take longer than expected but have an even more profound impact than anticipated,” they wrote. “Bitcoin-related technologies will disrupt payments markets and other trust-based markets within the next few years and for decades to follow.”
Such predictions contrast with opinions expressed by financial-industry leaders. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has said bitcoins probably won’t last after governments subject them to rules and standards akin to those for other payment systems. Billionaire investor Warren Buffett has said he’ll be surprised if bitcoins last 10 or 20 years.
The virtual currency is working through an “adoption chasm,” as programmers add services and fix flaws, Luria and Turner wrote. “The bitcoin value proposition will become more apparent as applications currently in development come to market with longer-term concerns being quelled.”
Bitcoins are valued at almost $570 yesterday, compared with prices of more than $1,100 in December and about $13 at the start of last year, according to CoinDesk, which tracks prices across key exchanges.