19 Feb 2022 13:12 GMT
Likewise, the economist offered her forecast on the digital currencies of central banks.
Bitcoin could become the digital gold of the 21st century even though it is not a reliable store of value today and faces more volatility in the future, says Marion Laboure, senior economist and market strategist at Deutsche Bank.
The analyst has shared her vision on the main cryptocurrency in the world, whose current capitalization is almost $800 billion it’s hard to ignore, in the form of questions and answers on the German bank’s website.
In the publication, the economist compared bitcoin to gold, pointing out that humanity “has always sought assets that were not controlled by governments” and that “gold has played this role for centuries.
“And yes, bitcoin could potentially become the digital gold of the 21st century. Let’s not forget that gold has also been historically volatile“, highlighted Laboure, pointing to the limit of the supply of bitcoins, below 21 millionas an important factor perceived by many as protection against inflation.
The causes and future of volatility
At the same time, he warned that it is important to keep in mind that bitcoin is a risky investment. “It’s too volatile to be a reliable store of value today, and I think it will continue to be. ultravolatile in the immediate future,” said the expert.
As reasons for this high volatility, the analyst first mentioned that approximately two-thirds of bitcoins are used for investments and speculation; second, that due to its limited marketabilityjust a few additional large purchases or exits from the market can significantly affect the balance between supply and demand.
Third, the value of bitcoin will continue to rise and fall based on what people think it is worth. “Small changes in general perception of investors on bitcoin can have a big impact on its price,” he said.
If bitcoin is the digital gold for being the market pioneer, and the most traded cryptocurrency, as well as having a huge capitalization, Laboure confers the status of silver to Ethereum.
The second coin by market value “enables many applications and use cases, such as decentralized finance and non-fungible tokens.”
“If bitcoin is sometimes called ‘digital gold’, then Ethereum will be ‘digital silver,'” he said.
obstacles to the market
Laboure indicates that the main problem of the crypto market is the lack of regulation. “Although it was a very important advantage for early adopters, today it prevents many investors or companies from entering the market,” he explains.
In addition, he described as “disastrous” the ecological footprint left by cryptocurrencies. At the beginning of 2021, the annual electricity consumption due to bitcoin mining was equivalent to the consumption of Pakistan, with a population of over 220 million people.
The economist assures that technological advances will help make the technology of cryptocurrencies cleaner.
Regarding regulatory measures, Laboure expects that the year 2021 represents “a turning point” and that in 2022 many economies adopt a solid regulatory framework for crypto assets.
In this regard, he mentioned that most of the G20 countries plan to tighten regulations on cryptocurrencies, while world governments are promoting their projects of centralized digital currencies. Therefore, the analyst forecasts the coexistence of cryptocurrencies and central bank digital currencies with the reduction of the proportion of cash as a means of payment.
If you liked it, share it with your friends!