Deutsche Bank: Bitcoin has become "too important to ignore", but has maintained volatility

After reaching a capitalization of $1 trillion, bitcoin has become " too important an asset to be ignored." This opinion was expressed by analysts at Deutsche Bank in a report published this week.

According to them, the price of bitcoin can continue to grow as long as it attracts new investors from among asset managers and companies. At the same time, the limited availability of the cryptocurrency market will remain the reason for its increased volatility, according to Deutsche Bank.

Bank analysts estimate the share of payment transactions in the bitcoin network at less than 30%. In 2020, the turnover of the cryptocurrency amounted to 28 million BTC, which corresponds to 150% of all coins in circulation. For comparison, Apple's stock turnover in the same year reached 40 billion units, or 270% of the total. In addition, the capitalization of bitcoin corresponds to 102% of yen in circulation, 65% of euros, 53% of dollars and 904% of pounds, but the daily circulation of bitcoin is only 0.06% of the volume of pounds. On this basis, the authors conclude that a few large purchases or sales will be enough to " significantly affect the supply-demand ratio."

In the future, according to analysts, the price of bitcoin will still be subject to the"Ding-Ding effect". This term in economics describes a situation where the probability of a certain event directly depends on how much people believe in it. The name comes from the name of the fairy from the fairy tale "Peter Pan", which, according to the main character, existed only because children believed in it.

Deutsche Bank compares bitcoin to Tesla, as it too "will have to turn potential into results to justify its value proposition." The valuation of Tesla shares is based on forecasts about the change in consumer preferences in favor of electric vehicles and the company's leadership in this market. Thus, in order to maintain the current assessment of the cryptocurrency market, there must also be a change in preferences: digital assets should become the preferred means of cross-border settlements, and bitcoin should lead these changes, Deutsche Bank says.