Bank of America upbeat on DeFi and NFT prospects

The digital asset industry could become ‘one of the most exciting markets’ in the coming years. That assessment was presented by analysts from Bank of America’s financial division in a research report.

In their view, the ‘digital asset universe’ with a capitalization above $2 trillion and more than 200 million users is ‘too big to ignore’.

Experts noted that Bitcoin, with a combined value of about $900 billion, occupies an important place in it, but the ecosystem is far broader. Among its components they named ‘tokens that operate as operating systems, decentralized applications (dapps), fiat-pegged stablecoins, CBDC and NFTs.

Researchers emphasised that Ethereum provided a publicly accessible platform for smart contracts, enabling the development of hundreds of dapps capable of transforming finance, insurance, legal services and many other sectors.

Digital assets that enable building applications are gaining the greatest value. We believe there may be more opportunities than skeptics think, the report says.

The most innovative directions, according to Bank of America, are DeFi and NFTs. Through dapps, the DeFi sector could ‘provide financial services to the majority of the world’s 1.7 billion unbanked people, simply via a smartphone’.

‘NFTs are changing how creators engage with fans and receive compensation,’ the researchers noted.

In August, NFT sales on the OpenSea marketplace surpassed $3 billion, compared with $250 million for all of 2020, the report authors noted.

The primary short-term risk to wide adoption of digital assets, according to Bank of America analysts, is regulatory uncertainty. Some governments, such as China or India, to varying degrees ban trading of Bitcoin and other cryptocurrencies, they noted.

The inevitability of CBDCs means that in other countries too, private digital assets could become targets for regulators who will see risks to payments and credit systems, the researchers say.

From our point of view, regulatory uncertainty is the greatest near-term risk, but regulation could spur more active investor participation in the long run after ‘rules of the road’ for digital assets are established,

the report’s authors said.

In March 2021, Bank of America stated that Bitcoin was useless as a store of value, and its only value was price appreciation.

In July the conglomerate created a group to study digital assets and opened futures trading based on digital gold.

Ahead of the Bitcoin legalization law taking effect in El Salvador, bank analysts said that this step could bring a number of advantages to the country. Opposing views, for example, were voiced by JPMorgan specialists and economist Steve Hanke.