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Bitcoin has clear 'potential for growth,' currency analyst says

Bitcoin has clear 'potential for growth,' currency analyst says
Bitcoin tokens in Sandy, Utah. (Rick Bowmer / Associated Press)
Bank of America Merrill Lynch's head of currency research says that bitcoin, the unregulated digital currency, may emerge as a serious competitor to traditional money-transfer providers, and he has identified a fair value for the burgeoning currency.
In a note to clients Thursday, David Woo, the bank's head of global rates and currencies research, said bitcoin could become a major means of payment for e-commerce, and that it has "clear potential for growth."

Woo said that bitcoin's fair value -- assuming it becomes a major player in e-commerce and gains a significant store of value similar to that of silver -- is $1,300.

But there are risks, Woo said: Bitcoin is highly volatile, the result of speculation activities, and that's hindering its general acceptance as a form of payment. 

Still, Thursday's report lends credence to the currency, which has soared in value amid widespread speculation. Bitcoin was trading at $940 Friday on Mt. Gox, an online trading platform. That's down from a high of $1,155. 

The currency topped $1,220 recently, but its value recently tumbled after Chinese authorities Thursday imposed restrictions on its use in the country. Demand has been strong in China, where Baidu, a popular online search engine, accepts bitcoin as payment for services. 

Chinese authorities, however, did not ban the currency. Individuals can continue using the currency at their own risk, the country's central bank said.

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