Bitcoin’s liquidity appears to be on the decline as the demand that drove the recent bull market appears to be focused on a relatively small number of investors who are unwilling to sell, according to a new study by Morgan Stanley. This lack of liquidity may affect its use for transactions, the investment bank said.
Addresses worth more than $ 1 million in Bitcoin are on the rise. Wallets with more than 100 bitcoin own over 60% of all coins issued. Almost 30% is kept in wallets with 1,000 to 10,000 coins.
In the report, Morgan Stanley said the case of Bitcoin as a medium of exchange “becomes harder to defend” as liquidity continues to decline, as it is not as attractive a vehicle for trading goods and services.
However, this could change with the development of products that enable a user-friendly experience when issuing crypto assets.
Morgan Stanley highlights PayPal’s confirmation of entry into the Bitcoin market in October 2020 as an example of this, even if its use turns out to be modest. With 325 million potential customers on the PayPal platform, businesses should see significant opportunities to develop products and services that make it easier to use crypto to buy and sell.
Ruchir Sharma, Morgan Stanley’s emerging markets chief and chief strategist of the world, echoed that view in a bullish new blog post suggesting that Bitcoin could replace the dollar as the world’s reserve currency.
He admits that almost all bitcoins are held as an investment rather than a transaction, but believes that is changing thanks to developments like the introduction of PayPal.
