Citibank's in-depth analysis of Bitcoin: On the Verge of Going Mainstream! Unexpectedly Criticized by Financial Times

"It took 50 years for the telephone to reach 50 million users, 22 years for the television, 7 years for the Internet, and Pokémon Go only took 19 days. In the past 7 years, Bitcoin has shown remarkable adoption rates, which is not surprising," Citibank wrote in its report.

Citibank recently released a research report titled "Bitcoin at a Tipping Point," stating that Bitcoin is at a tipping point and may be on the verge of becoming a mainstream asset after being adopted by companies like Tesla.

Despite the 108-page report and coverage by mainstream media outlets such as Forbes, the Financial Times (FT) column harshly criticized it in an article titled "Hey, Citibank, your Bitcoin report is terrible", suggesting Citibank should take down the report immediately. Let's first look at the key points of Citibank's report.

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Bitcoin Could Become the International Trade Currency

Citi pointed out that Bitcoin has the potential to become the top choice for international trade currency, making headlines in major media outlets. The report mentions that Bitcoin's appeal has shifted from retail to institutional investors, especially those seeking alternative assets and returns, with its limited supply being seen as digital gold.

Furthermore, the improvement in the ecosystem of exchanges, custodians, and other entities aligns with the needs of institutional investors. Citi emphasizes various data points to highlight Bitcoin's gradual move towards the mainstream.

Rising Institutional Interest

Significant Increase in Holders

The graph shows a significant increase in Bitcoin holders, especially long-term holders who have held for over a year, post-2018. There is also an increase in those holding for over 5 years, although this likely includes a substantial portion of permanently lost Bitcoin.

Steady Growth of Thousand-Bitcoin "Whales"

According to Coin Metrics data, addresses holding over 1,000 bitcoins are continuously increasing.

Bitcoin Adoption Process

This is Citi's main argument in the report, outlining the potential path for Bitcoin to achieve widespread adoption:

• Technological applications: new payment mechanisms / blockchain
• Debate between regulation and store of value: currency
• Increasing focus on scarcity: digital gold
• Global value transfer network: preferred medium for global trade

Risks of Bitcoin

Citi points out that over the next 7 years, Bitcoin's decentralized nature, fast cross-border transfers, secure payment channels, and traceability could lead it to become the preferred medium for international trade.

However, Citi also mentions potential risks in the development process, including low transaction throughput and regulatory uncertainties in certain countries. Citi emphasizes the importance of blockchain replacing traditional financial systems; otherwise, Bitcoin becoming the medium for international trade could become a reality.

Financial Times Criticizes Citi's Report

The Financial Times column severely criticizes Citi's lengthy report titled "Hey, Citi, Your Bitcoin Report Is Terrible," citing unreliable data sources and narrative errors in the data.

Data Source: 99bitcoins?

The Financial Times states that Citi claims 36% of small and medium enterprises adopted Bitcoin in 2020, citing an unknown website called "99bitcoins" as the source.

In reality, this survey was conducted by the insurance company Hartford Steam Boiler HSB and has no relation to 99bitcoins. It is unclear why the Financial Times accuses Citi of this.

Confusion between Basis Points and Percentage?

Citi mentions the percentage of cryptocurrency used in illegal activities, decreasing from 2.13% in 2019 to 0.34% in 2020. In comparison, credit card fraud increased from 4.38bp in 2015 to 13.46bp in 2016.

The Financial Times criticizes Citi for not distinguishing between basis points (BP) and percentages, and states that they have informed Citi of these errors. While Citi has promised correction, the mistakes persist.

Note: One basis point (BP) equals 0.01 percentage points (0.01%)

Citi's reports always spark controversy; they previously predicted Bitcoin to surpass $300,000 by the end of this year. However, all investments carry risks, and no one can guarantee Bitcoin's ultimate success. Predicting the future 7 years ahead is indeed quite far-fetched in this rapidly changing era.