Bank of Singapore issues a fresh release of its research paper regarding cryptocurrencies and crypto-assets. Research suggests crypto overtaking gold and other traditional products in the near future. But does not agree that digital currencies will overrun fiat currencies even if crypto is adopted massively.
Amid the crypto price boom, the Bank of Singapore to has compiled a comprehensive research report on crypto which is compiled by Bank’s analysts. In the research paper, the Bank of Singapore has suggested that during the Covid-19 crisis, the crypto industry flourished as an alternate medium for storing value. With Bitcoin being the leader, the industry thrived and emerged as a source of storing value better than Gold.
The bank pointed out in its research that the evident risk of cryptocurrencies is their high volatility. This volatility is the main hurdle in the mass adoption of cryptocurrencies and considered an ineffective source of exchange by the majority of people. Resultantly, crypto has been labeled as an unviable medium of trading and exchanging by those who lack the knowledge of crypto.
Bank of Singapore also suggested that the issue of volatility has greatly decreased since 2020, the reason being the adoption of crypto, in particular Bitcoin, at institutional and individual levels. The bank suggested further investment in the crypto industry will mean automatic reduction of volatility. If these hurdles are removed then cryptocurrencies will be overpowered and change the present financial structure, stated the Bank of Singapore.
Bank of Singapore also suggested that cryptocurrencies have proved that they belong to a distinct asset class. In particular, they are a profitable addition to the investment portfolio of any individual or institution.
On the other hand, Bank’s Chief Economist, Mr. Mansoor suggested that there is still a shortage of trustworthy crypto asset management companies. Mansoor stated that the crypto industry will need to create an atmosphere for investors that is free from insecurities. Above all, Chief Economist was of the view that liquidity needs to be brought down considerably. He argued that if liquidity is reduced that volatility will prevail at a certain level which would become conveniently affordable.
He also referred to 2020’s Bitcoin surge until the initial days of January and its recent dip wherein the value has decreased massively. Mansoor pointed out that in 2020, Bitcoin’s value soared by about 300% which did not go unnoticed. Resultantly, Bitcoin and other crypto-assets received institutional backing and brought the industry into the limelight. However, crypto-assets continued to face fluctuations quite often which caused the recent crypto crash. It is essential for crypto industry to put in place a mechanism which can reduce these fluctuations, if it cannot be eradicated completely. He argued that this will force investors to dump crypto assets at a time when the industry is going through a meltdown.
In the conclusion of the Bank of Singapore’s research paper, the bank did not agree that digital currency will ever overpower fiat currencies.