Deutsche Bank Analysts Say Volatility Is Preventing Bitcoin from Being a Reliable Store of Value

By January 28, 2020Bitcoin Business
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Deutsche Bank Analysts Say Volatility Is Preventing Bitcoin from Being a Reliable Store of Value
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Key highlights:

  • Bitcoin is too volatile to be a reliable store of value, Deutsche Bank analysts say
  • Still, they maintain that cryptocurrencies are revolutionary tech and a new cryptocurrency could quickly reach mainstream use

In a recently released report, analysts at Deutsche Bank say that Bitcoin is still too volatile to be reliably used as a store of value. As an example, the report uses the massive price crash that followed after BTC’s late 2017 all-time high, in which the world’s leading cryptocurrency lost two thirds of its value in little more than 6 months.

A similar sentiment was also recently expressed by legendary investor Ray Dalio, who said that investors shouldn’t be looking at Bitcoin when trying to protect their wealth during an economic downturn.

The analysts note that Bitcoin’s volatility has led to the emergence of stablecoins, which are blockchain-based assets that can be pegged to fiat currencies, commodities and other assets.

Could a new cryptocurrency reach mainstream adoption quickly?

The narrative saying that Bitcoin will be used as a replacement for traditional currency has become much less popular, and many Bitcoin proponents are now advocating for BTC as a store of value, a digital version of gold. In part, this is perhaps also a reaction to the Bitcoin network’s poor performance and high transaction fees during the bullish frenzy of late 2017, when demand for BTC was at its highest point ever.

From a big picture perspective, the report claims that cryptocurrencies as a whole remain in the “early adoption” stage and that we should expect plenty of experimentation in this space moving forward. The analysts write that a new crypto asset could come out of left field and reach mainstream usage:

“Some believe cryptocurrencies should be considered an asset class, akin to gold. Perhaps, but cryptocurrencies are also a revolutionary new technology that can change the way we interact with payments. Looking ahead, it may not be surprising if a new and mainstream cryptocurrency were to unexpectedly emerge.”

However, the analysts maintain that cash will likely remain relevant for multiple decades, as physical money enjoys “deep-rooted trust” during times of uncertainty.

Bitcoin is currently changing hands at just above $9,000, with holders hoping for the great start to 2020 to extend ahead of the highly anticipated May 2020 Bitcoin halving. On January 1, BTC was trading at around $7,200.

Bitcoin is too volatile to be a reliable store of value, Deutsche Bank analysts say

Still, they maintain […]

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