On December 15, Bitcoin hit a new record as it reached almost $18,000 on the Bitstamp exchange. At the same time, total market capitalization of all Bitcoins has overcome $300B, according to Coinmarketcap . An American investor and hedge fund manager Mark Yusko believes that Bitcoin’s price will grow up to $400,000 in the future. He explains the future radical growth of Bitcoin as a result of technical infrastructure.
On this basis, experts warn that the most famous cryptocurrency in the world may change the game in traditional financial markets. A study by three establishments, Anglia Ruskin University, Trinity College Dublin, and Dublin City University shows that Bitcoin could threaten the financial stability of classical currencies and markets.
“Although bitcoin is not regulated by governments, it could still have a knock-on effect on traditional markets due to the interconnectedness of cryptocurrency markets with other financial assets,” told Reuters Larisa Yarovaya, a lecturer at Anglia Ruskin University and one of the report’s authors.
No more use for banks
In particular, Bitcoin may threaten banks worldwide. Yusko, who is also the founder and CEO of the North Carolina-based Morgan Creek Capital Management firm, in his interview on Bloomberg stated that there is a possibility for people to transact exchanges on blockchains without turning to banks for their confirmation of transaction’s validity. It means that banks will lose part of their income, which may negatively influence the job market and not only.
"It is extremely natural to expect banks to be dismissive and skeptical because this [Blockchain and the cryptocurrency Bitcoin] is a disruptive technology. This will change the supply and demand equation for banking. It is that big. I'm not surprised at all that bankers, financiers and Saudi Princes are coming out against it. This is a truly disruptive technology,” stated Yusko.
Yusko also predicts that physical, financial establishments will soon be outdated.
"If you think about it why do we need a giant building to have a bank? We don't. We used to why do we have to have something in the first place. You had to have something where people felt safe putting their money in. Literally and physically putting their cash or valuable in safe boxes where you had vaults, and you kept money in,” said the investor.
Also, he believes that what Bitcoin is doing to the modern financial system is simply what internet has done to the world in the past 30 years.
"Think about what has been disrupted by the internet over the past 30 years. The same is going to happen with the internet of money. Now crypto is very different it is one form of application of blockchain technology,” explained Yusko. He added that he remains a huge fan of Bitcoin in the view that it has survived the startup phase as well as it emerged as the leader in the store of value like the digital gold.
He also thinks that the change thanks to Bitcoin will come through a disruptive process. It will be especially troublesome for banking and finance, payment systems, futures and any other kind of electronic commerce.
Banks are becoming aware of the threat
Last year Herman Gref , the chairman, and CEO of the Russian Sberbank, stated that thanks to cryptocurrency there is no more space left for banks.
"We considered the prospects of using blockchain technology. I would not say anything about this technology because there is a lot to talk about here. But when you are considering the prospects of using mature blockchain technology... In general, there is no place for banks there,” said Gref, confirming, that even he owns “some” Bitcoins and Ethereums.
Nowadays officials have started much more attention to the growing pervasive threat from the cryptocurrency. However, the risk is that it might be too late for them to react to opportunities that digital currency has offered to the world.
"Central banks cannot afford to treat cyber currencies as toys to play with in a sand box. It is time to realize that they are the real barbarians at the gate,” said to Bloomberg Andrew Sheng, chief adviser to the China Banking Regulatory Commission and Distinguished Fellow of the Asia Global Institute, University of Hong Kong.
Some Asian central banks seem to have found the solution to the issue. The People’s Bank of China has done trial runs of its cryptocurrency. Meanwhile, the Bank of Japan in cooperation with European Central Bank has launched a research project regarding the use of distributed ledger for market infrastructure.
Anyway, unless central banks handle Bitcoin and other cryptocurrencies, they are going to lose control over the money supply, as more people will get used to decentralized cryptocurrencies. However, banks have the other choice – if they cannot fight Bitcoins, they should “join” them.