Can Bitcoin Really Become a Reserve Currency by 2030?

According to a 2015 study by Magister Advisors, Bitcoin could become the sixth-largest reserve currency by 2030. The British financial institution is focused on mergers and acquisitions in the technology sector.

Since its launch in 2009, Bitcoin has grown rapidly in all aspects, including user base, transaction volume, price, market capitalization and global popularity. In the past year, many large financial and technology consortiums, including JPMorgan, Goldman Sachs and Fidelity Investments, have taken a positive attitude towards Bitcoin.

Traditional market operators, such as CBOE (Chicago Board Options Exchange), the largest options exchange in the United States, are integrating Bitcoin to improve asset liquidity for large-scale institutional investors and retail investors. Earlier this month, Ed Tilly, chairman and CEO of CBOE Holdings, said:

We look forward to responding to the growing interest in cryptocurrencies with Bitcoin futures trading on regulated derivatives exchanges, which offers many advantages including transparency, market pricing, high liquidity, and centralized settlement.

Over the past few years, more and more investors and companies have begun to accept Bitcoin as a digital currency and safe-haven asset rather than a speculative asset. The user base of platforms such as Coinbase and Blockchain has also increased significantly.

For Bitcoin to surpass the market capitalization and user base of reserve currencies, it needs to develop and eventually solve its scaling problem. Currently, many holders view Bitcoin as a long-term investment rather than a currency. In order to compete with other reserve currencies, Bitcoin's global popularity must increase significantly until Bitcoin can be regarded as a digital currency rather than a speculative or investment tool.

Jeremy Millar, partner at Magister Advisors, told CNBC that Bitcoin has proven its currency identity and has even inspired the mass adoption of blockchain technology among large companies in the financial and technology fields.

We have reached a fork in the road between Bitcoin, which has proven its currency properties, and blockchain, which will essentially become the global default standard distributed ledger for financial transactions.

Since Millar and Magister Advisors released their report on Bitcoin’s growth and potential to replace reserve currencies, Bitcoin’s market capitalization has surpassed $70 billion, outperforming all asset classes and currencies.

The popularity of Bitcoin in Asia, especially in South Korea, China and Japan, is a factor driving the rise in Bitcoin prices. In Japan, for example, the country's largest technology group, CME Group, has entered the global Bitcoin trading market, aiming to provide Bitcoin users with an advanced and regulated trading platform. In the Philippines and South Korea, as Bitcoin has become a legal method of remittance, more and more users have begun to use it for payment. KakaoTalk, the most widely used communication platform in South Korea, with a market penetration rate of more than 90%, recently invested in a Philippine Bitcoin remittance service provider to increase the popularity of Bitcoin in the two countries.

The biggest obstacle to Bitcoin's mainstream adoption remains the scalability issue. Once the Bitcoin Core development team's scaling and transaction scalability solution, Segregated Witness (SegWit), is deployed on major wallet platforms, most transactions can be executed through Segregated Witness, and Bitcoin block capacity and transaction fees are likely to be significantly reduced, making the network more attractive to new users.