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DeFi might be more valuable than Bitcoin says Bank of America

Photo of: Nathan VDH
by Nathan VDH

In its report titled “Bitcoin’s dirty little secrets,” Bank Of America seriously scratches the first of the cryptocurrencies. But its analysts also believe that Ethereum and DeFi offer greater value.

What if the future of cryptocurrency and blockchain lies in Ethereum, not Bitcoin? In terms of capitalization, BTC still far outweighs its rival, Ether. However, there are other parameters that need to be considered to determine its potential.

Analyst Ryan Watkins of Messari believes that once Ethereum 2.0 is up and running, ETH could be in a position to take Bitcoin’s place as the world’s leading cryptocurrency. And he’s probably not the only one to share this opinion.

For Bank of America, Ethereum is indeed more interesting than Bitcoin. It is true that the bank and its analysts are not supporters of BTC. The proof? The publication this week of a report entitled “The dirty little secrets of Bitcoin”.

For BoA, the reasons to stay away from Bitcoin are legion. For the report, there is “no good reason to own BTC, other than the rising price. Moreover, its environmental record is poor, as Bill Gates, among others, has already denounced.

Bitcoin is also “correlated with risky assets” and “exceptionally volatile, making it impractical as a store of value or payment mechanism,” says Bank of America. The result?

The “main portfolio argument for holding bitcoin is not diversification, stable returns or protection against inflation, but rather outright price appreciation, a factor that depends on demand for Bitcoin outstripping supply. “

BTC definitely has nothing going for it in the bank’s eyes. The same could be true of Ethereum and DeFi, of which it is the main network. “Bitcoin is the most talked about cryptocurrency, but Ethereum has more features, including being more flexible,” the report considers.

The growing DeFi is the main asset of Ethereum, which is central to its development. And yet, analysts judge, the blockchain has the same problems as Bitcoin.

However, Ethereum “may have better tools to solve them. “A positive note. And also a cautionary note about decentralized finance. “DeFi is interesting, but it is small and struggling to become mainstream. “

Conclusion? “We don’t think it offers a compelling lending proposition at this time, and its diversification makes it difficult for the mass market,” BoA slices. So traditional finance doesn’t have too much to worry about, obviously.

It should react in spite of everything. DeFi does, however, highlight the opportunity that [distributed ledger technology] presents to finance. We believe that one of the best protections against disintermediation by DeFi would be for traditional finance to seize these opportunities. “