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No more volatile than gold was for centuries, Bitcoin has the potential to replace the precious metal, Deutsche Bank believes.
September 28, 2021 at 5:00 pm UTC · 2 min read
A senior analyst with the Deutsche Bank believes that Bitcoin has the potential to become the 21st century’s answer to gold.
Marion Laboure, a senior economist and market strategist at Deutsche Bank, said that the crypto industry’s market cap of more than one trillion dollars makes them too important to ignore, and highlighted three reasons why the bank believes the world’s largest cryptocurrency might become a safe haven asset.
Too many people see Bitcoin as a protection against inflation for it to be ignored
While large legacy banking systems might not seem too eager to acknowledge the impact of the crypto industry, Deutsche Bank seems to have gone against the current and is beginning to embrace the future in which cryptocurrencies are becoming the norm.
In a recent interview with DB, senior analyst Marion Laboure shared the bank’s stance on cryptocurrencies and explained why it believes in Bitcoin’s potential.
Laboure noted that while Bitcoin was a completely different type of asset from fiat currencies, many people see it as protection against inflation. With all fiat currencies having a supply that’s controlled by central banks, Bitcoin’s fixed supply of 21 million tokens makes it an attractive hedge against money printing.
“People have always sought assets that were not controlled by governments,” Laboure said.
Bitcoin’s deflationary nature doesn’t make it attractive as a means of payment and an alternative to fiat currencies. It does, however, make it an alternative to gold.
Laboure explained that gold has been considered a safe haven asset as its supply and distribution wasn’t controlled by any central government. Sharing many of its same characteristics is Bitcoin, which she believes has the potential to replace it. The huge volatility Bitcoin suffers from won’t affect this potential—she noted that gold has been highly volatile for centuries and that hasn’t stopped it from being used as a hedge against fiat currencies.
“I see basically three reasons for this: First, about two-thirds of Bitcoins are used for investments and speculation. Second, due to its limited tradability, just a few additional large purchases or market exits can significantly impact the supply-demand equilibrium. Third, Bitcoin’s value will continue to rise and fall depending on what people believe it is worth. Small changes in investors’ overall perceptions about Bitcoin can have a large impact on its price.”
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