Bank of America Merrill Lynch (BoAML) has said that Bitcoin could become a major source of e-commerce and can become a serious competitor to traditional money transfer services.
In BoAML's view Bitcoin has clear potential for growth. However, the bank believes Bitcoin's volatility remains a problem for its further development.
BoAML estimate that if Bitcoin grows into a significant player in e-commerce and gains a reputation as a store of value similar to that of silver, the total market capitalization of Bitcoin could be as much a $15bn or $1,300 per Bitcoin.
The bank cites the winner takes all market as ensuring increasing acceptance and popularity of Bitcoin and raising the likelihood of success. As Bitcoin becomes more widespread the incentive for consumers to use other digital currencies will likely diminish.
Features such a finite supply and lower transactions costs also contributed to the bank's positive review of the online currency.
BoAML also point to the greater security Bitcoin can offer consumers when compared to cash. Bitcoin is harder to steal due to its encrypted format while physical Bitcoin theft is impossible.
However, BoAML also highlight the dangers posed to Bitcoin by government regulators. If regulators impose controls increasing the transaction costs for Bitcoin the appeal of the cryptocurrency may diminish.
Governments are unlikely to welcome the increased use of a currency that many favour for its anonymity.
Commenting on speculation that Bitcoin may be used to avoid taxes and capital controls BoAML said:
The fact that all Bitcoin transactions are publically available and that every Bitcoin has a unique transaction history that cannot be altered may ultimately limit its use in the black market/underworld.