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BoAML jumps on Bitcoin mania with $1,300 price target
by David Campbell on Dec 06, 2013 at 07:38
Bitcoin has recently attracted attention from Chinese speculators, central bankers, and the tiny channel island of Alderney, which has toyed with the idea of backing physical currency with them.
The currency has now well and truly arrived however: a major Wall Street institution, Bank of America Merrill Lynch, has initiated coverage, with a price target of $1,300.
That is 19% upside on a current dollar exchange rate of $1,052, down sharply yesterday after China said it was open to the currency as a form of online payment but warned against banks dealing in it.
While the note offered extensive cost/benefit analysis and a serious if highly speculative view of its potential to become a major means of online exchange, it largely attributed value as a tech-startup.
‘Given Bitcoin’s supply is fixed, when one buys a Bitcoin, one is acquiring not only a medium of exchange but also an investment in the enterprise value of Bitcoin,’ said researcher David Woo.
‘From this point of view, Bitcoin's market capitalization could be viewed, with a little leap of faith, as its enterprise value.
‘With the average market capitalization of Western Union, MoneyGram and Euronet at about $4.5 billion, we will add this number to the maximum market capitalisation of Bitcoin’s role as a medium of exchange.’
Much more nebulous was the crypto-currency’s intrinsic value and given its current acceptance and use in the digital marketplace, the current market capitalisation may have run too far, he added.
‘Its high volatility, a result of speculative activities, is hindering its general acceptance as a means of payments for on-line commerce… the 100 fold increase in Bitcoin prices this year is at risk of running ahead of its fundamentals.’
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