Bitcoin continues to persevere through anything and everything thrown at it: fraud schemes, thefts, rulings from the People’s Bank of China, etc.
Prices have now recovered to more than $US800 on the Mt. Gox exchange after falling below $US500 late last year.
So we are not totally surprised to see increasing coverage of the cryptocurrency by Wall Street analysts.
In a new note to clients, Wedbush analyst Gil Luria lays out which companies Bitcoin and/or cryptocurrencies in general could boost, and destroy.
“We believe Bitcoin and its associated technology represent a potential disruption to our covered companies,” wrote Lauria. “Furthermore, we believe Bitcoin’s potential lies beyond the ‘coin’ as the underlying blockchain protocol can be used to replace traditional intermediaries by acting as an exchange mechanism for a multitude of transactions.”
And now, the companies he’s referring to:
Overstock (ticker OSTK)
The online retailer recently announced it would start accepting Bitcoin sometime this summer. Like most retailers who accept Bitcoin, it will immediately swap the currency for dollars to avoid price volatility. “We believe OSTK will benefit from lower transaction charges as it starts accepting Bitcoin in 2014 (as well as related publicity push within the bitcoin community),” Luria writes.
ebay (ticker EBAY)
Luria thinks its inevitable PayPal, which is owned by the, online merchant giant will start taking Bitcoin. “We see EBAY’s PayPal benefiting from lower funding costs when it allows Bitcoin in its digital wallet,” he writes.
IBM (ticker IBM)
IBM quietly released a video in November in which its executive architect for banking and finance said cryptocurrencies like Bitcoin “would change the world.” “We believe IBM has become an early adopter of bitcoin technology (link), but other technology companies may benefit from the buildup of the crypto currency network almost unwittingly,” Luria writes.
Taiwan Semiconductor (ticker TSM) and Advanced Micro Devices (AMD)
Only a small handful of chipmakers have the ability to manufacture the advanced processors needed to mine Bitcoin. TSM and AMD are the two largest. “We estimate >$200 million has already been spent on Bitcoin network (mining) equipment this year, most meaningfully on chip fabricators TSM and AMD,” Luria says.
Western Union (ticker WU) and MoneyGram (ticker MGI)
Bitcoin’s value as a medium for transferring funds is the thing most often cited to justify its valuation. We’ve written about this previously here and here among other places. “We see some risk to money transfer companies such as WU and MGI as bitcoin technology makes it possible to perform remittance at a radically lower price,” Luria writes.
Visa (ticker V) and MasterCard (ticker MA)
Another source of value for Bitcoin is the much lower fees needed to process payments, compared with those charged by the mega card companies. “We also see some longer-term threat to V and MA, especially in cross border and micro payments,” Luria writes.
CME (ticker CME), NASDAQ (ticker NDAQ), NYMEX (ticker NYX)
There’ve yet to be any major breakdowns on this subject, and Luria doesn’t provide much insight, though it seems possible Bitcoin trading could siphon away flows from precious metals. “Although this may be even further out, we see a potential for the technology to encroach on exchange companies such as CME, NYX, NDAQ,” he writes.
Luria is actually pretty negative on Bitcoin itself. But he is impressed by the technology underlying it, and cryptocurrencies in general.
“We continue to believe there is a meaningful probability Bitcoin (the specific currency/conduit) may not succeed, but this will most likely be a result of the emergence of a better crypto currency,” he wrote. “We believe alternative currencies will continue to emerge, though none of the current batch appears to be superior enough to overcome the substantial head start for Bitcoin.
“As with any new disruptive technology, we would expect the new powerful technology to continue to be utilized for nefarious purposes. We also believe that given the early stages of development and revolutionary technology, weaknesses will continue to be identified and at times exploited.”
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