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Bank of America says Bitcoin could become a 'major means of payment'

Bank of America says Bitcoin could become a 'major means of payment'

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Analysts at Bank of America Merrill Lynch issued the bank's first research report today on Bitcoin, the virtual currency that approximates cash on the internet, concluding that the currency has the potential to become a "major means of payment for e-commerce" as well as a "serious competitor to traditional money transfer providers."

Assuming Bitcoin becomes mainstream, Bank of America currency strategists estimate it is worth $1,300 apiece. But with the value at $1,000 today and increasing rapidly, it is in danger of "running ahead of its fundamentals," they write.

The report also notes that the rapid jump in Bitcoin's value — which was just $100 in August — correlates with interest in the currency coming from China.

Bitcoin's disadvantages according to the report are the same as those regularly discussed in the Bitcoin community: its price volatility disincentivizes its use for trade, transactions take 50 minutes to process, and its legal status is still undetermined. Governments will have an incentive to "crack down" on Bitcoin if it gets too big, the report says.

Bank of America estimates Bitcoin could be worth $1,300 apiece

The researchers also note that security at the exchanges where people buy and sell Bitcoin has been historically unreliable, as evidenced by thefts and hacks in the past.

Bank of America is the first major Wall Street bank to issue an opinion on the virtual currency, which has grown in prominence since it debuted in January of 2009.

The report is a positive sign for those who hope that Bitcoin will become a universal currency, but it's ironic considering the technology was designed to empower individuals over banks. The last time Bitcoin made a splash in the financial district was probably 2011, when the Occupy Wall Street protest became one of the first major efforts to accept donations in the currency. But now that the total Bitcoin economy is worth $13 billion, it seems everyone wants a slice.