Deutsche Bank analyst believes bitcoin could become 21st century digital gold

Marion Laboure also discussed CBDCs and bitcoin's main obstacles to adoption

Deutsche Bank building, Berlin, Germany – Photo: Shutterstock

Bitcoin could potentially become the 21st century digital gold. These are the words of Marion Laboure, analyst at Deutsche Bank Research.

Laboure explained that people have always wanted access to assets that are not controlled by governments, a role played by gold for centuries. Thus, the analyst said: “I could potentially see bitcoin become the 21st century digital gold. Let’s not forget that gold was also volatile historically.”

Still, Laboure did warn that bitcoin is risky to invest in and “too volatile to be a reliable store of value today”. She added: “I expect it to remain ultra-volatile in the foreseeable future.”

The analyst went onto say that bitcoin is the “clear pioneer” of the crypto world with the number two crypto being ethereum. Laboure said: “If bitcoin is sometimes called ‘digital gold’, ethereum would then be the ‘digital silver’!”

In addition, the fact that the supply of bitcoin is fixed and the maximum amount in existence will always be just under 21 million means that bitcoin can serve as a successful protection against rising inflation. The analyst said: “In many fiat currencies central banks control the supply and have been increasing it significantly in recent years.” Roughly 89% of bitcoin is already in circulation.

Laboure did add that she does not believe bitcoin will be displaced as the strongest and most valued crypto because it has “first-mover advantage”.

CBDCs and cryptos

The Deutsche Bank Research analyst also explained the main differences between central bank digital currencies (CBDC) and cryptocurrencies. Laboure said: “CBDCs are fully centralised, issued by a legal entity and bound by regulatory framework. On the contrary, cryptocurrencies are decentralised, with a transaction ledger visible to all.”

When asked if she believes CBDCs could ever replace cryptos or cash, she said not. Laboure added: “CBDC, cash and cryptos will coexist. Cash will certainly not disappear, but we expect it to decline as a mean of payment. Most G20 countries plan to impose stricter regulations on private cryptocurrencies. She pointed to the fact that digital cash initiatives by banks and governments had sped up or multipled over the past three years.

Bitcoin’s main obstacles

Laboure sees the main issue surrounding bitcoin and other cryptos is the lack of regulation. The analyst believes this prevents investors and businesses from entering the market. The environmental consequence of bitcoin is also proving to be an issue. “Bitcoin mining uses up a lot of electricity consumption and bitcoin’s annual electricity consumption puts it at being the equivalent of a top 30 country.” Laboure gives the example that in one year, bitcoin uses about the same amount of electricity as the entire population of Pakistan.  

She says these issues could be overcome by the latest technical developments which will allow cryptos “to become greener”. Regarding regulation, the Deutsche Bank Research analyst believes 2021 will “be a game changer” and that 2022 will see numerous economies adopt a strong crypto asset regulatory framework.

Further reading: HSBC chief executive backs central bank digital currencies

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