Ukraine will be among the five countries worst affected when the financial bubble surrounding the cryptocurrency Bitcoin finally bursts, analysts from U.S. banking and financial services group Citigroup Inc., or Citi, have said in their latest report.
While all of the countries in the world will be affected by the possible crash, Russia will be worst hit, with Ukraine not far behind, the experts from Citi said.
Citi’s analysts said the popularity of Bitcoin is proportional to the size of a country’s shadow economy – the darker it is, the more people use cryptocurrencies. They calculated the share of Bitcoins in the gross domestic product of a range of countries, and assumed that if Bitcoin crashes, these countries will lose those shares.
Citi reckons that Russia, where the share of Bitcoins makes 5 percent of GDP, will be worst affected if the Bitcoin bubble bursts. Ukraine is the fourth most vulnerable, with 2.5-percent share of Bitcoins in GDP, ranking after Nigeria and New Zealand, and ahead of Kenya.
The report does not give a prediction for when the bubble might burst. It suggests, however, that government actions could be the trigger.
“We are already observing classic signs of a bubble that is fairly advanced. One potential trigger could be that eventually governments come out forcefully against Bitcoin,” the Citi analysts wrote, adding that the reasons prompting countries to do this include the volatility of the currency, the anonymity of transactions made using it, and the fact that its use props up the shadow economy.
“Typically, it is much better from a public policy point of view to stamp out bubbles early, rather than late,” Citi’s analysts said. “One reason is that the negative wealth effect from a large bubble that collapses is of course much more dangerous than from a smaller one,” the study said.
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