Deutsche Bank Analyst: Bitcoin Has Value Based on Pure Wishful Thinking

Marion Labouré, an analyst at Deutsche Bank, writes, “The same laws that apply to attractiveness also apply to bitcoin, like a “fashion disaster” in the fashion world.

Deutsche Bank Analyst: Bitcoin Has Value Based on Pure Wishful Thinking

Deutsche Bank published a research report on Thursday titled “Bitcoin: The Last Stage Before Obsolescence,” which quotes Karl Lagerfeld, the “Old Master. Deutsche Bank analyst Marion Labouré wrote that “the same laws that apply to attractiveness also apply to bitcoin, which, like fashion’s “fashion disaster,” is rapidly becoming obsolete.”

Labouré’s report reads, “In the last three months, something has begun to fall apart in the cryptocurrency market. All it takes for a cryptocurrency to go from popular to obsolete is a celebrity tweet and a government statement,”

On May 12, Tesla CEO Musk tweeted that Tesla would stop accepting payments in Bitcoin due to environmental concerns.

“Those few words led directly to Bitcoin’s value plummeting to under $48,000 from nearly $60,000 in the first few days, and then on Tuesday, the People’s Bank of China reiterated that it would ban crypto tokens as a means of payment, causing Bitcoin to plunge below $30,000 at one point, its lowest value since January. “

“Bitcoin’s $1 trillion market cap makes it impossible to ignore, but Bitcoin’s role as a true trading tool is very limited.” That’s why Labouré says “the value of bitcoin is based entirely on wishful thinking.”

“The value of bitcoin will continue to go up and down depending on how confident people are in its value.” Labouré said this phenomenon is known as the “fairy effect” because belief is the only way to determine its value.

The medium- to long-term outlook for digital assets is uncertain, Labouré said, and it will take a long time for any kind of cryptocurrency to gain widespread traction. In the meantime, bitcoin “will remain in circulation and its value is likely to continue to remain volatile.”

According to Deutsche Bank’s estimates, 30% of bitcoin activity is for payments, with the rest being “financial investments.” And contrary to what its volatility might suggest, total liquidity is not high. Last year, Apple traded 270% of the number of its shares; for bitcoin, that number was 150%.

That’s another reason why cryptocurrencies may continue to remain volatile.

“Bitcoin is expected to remain ultra-volatile due to its limited tradability; some large over-the-counter transactions could significantly impact the supply-demand balance, and the underlying causes of Bitcoin’s volatility include small, strategic asset allocations and market moves by large institutions.” Labouré wrote.

Federal Reserve Chairman Jerome Powell sees digital currencies as a complement to the U.S. dollar, not a substitute, and whatever the Fed does will affect the cryptocurrency market. With Bitcoin, domestic governments are taking a more aggressive approach to make room for the digital yuan to thrive. “It is clear that China’s targeted regulatory actions are designed to support the launch of the digital renminbi (CBDC),” Labouré wrote.

Libra was used as a classic showcase model for government power in cryptocurrency regulation, Deutsche Bank noted, and Facebook’s plans for Libra came to an end in 2019 when it announced a future global currency that would significantly impact government control over financial rights, which triggered a regulatory siege.

“The product is now focused on reducing the cost of payments, rather than competing with governments and central banks by creating a parallel means of payment. In other words, Facebook doesn’t intend to create a currency that competes with the U.S. dollar; instead, they want to compete with traditional dollar-based payment methods,” Labouré wrote.

That, she said, is probably the best way to look at cryptocurrencies, not just as a speculative asset, but as a fintech solution that enables faster and cheaper global payments.

“Ultimately, it’s not hard to regulate cryptocurrencies, and governments will jump in to protect their financial monopolies. The trading drawbacks of Bitcoin in the future will probably eventually allow it to be replaced by another, more diverse digital asset.”

By Chen Zou

Posted by:CoinYuppie,Reprinted with attribution to:
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