The German bank Deutsche Bank characterises Bitcoin as very important in its recent analysis. In fact, as it points out, its value is such that it cannot be ignored by the entire investment community.
With a market capitalisation of more than $1 trillion and an upward trend, both governments and central banks have now realised that cryptocurrency has come to stay, Deutsche Bank claims.
Therefore, by the end of 2021, states are expected to establish a regulatory framework for this market – although trade and marketability have not yet evolved. The most essential comparative advantage of Bitcoin over the foreign exchange market and gold is the offer. Its rarity is a reason to develop into a special category of assets.
The struggle to turn cryptocurrencies into a means of payment is intense. Bitcoin remains a non-cash asset that is rarely used as a means of payment, the German bank claims. Facebook’s strategy for Libra (renamed Diem) is based on a different approach, focusing on consumer adoption and the actual use of money. Facebook’s strategy (revised last year from its original 2019 version) has changed. The company is now focusing more on reducing transaction costs, rather than competing with governments or trying to create a parallel means of payment.
Facebook, with nearly 2.8 billion users (one-third of the world’s population), now has the ability to compete with traditional online payment platforms and promote digital currencies to the mainstream audience, says Deutsche Bank.
Most importantly, small changes in investors’ perceptions of Bitcoin can have a big impact on its price, especially since relatively few Bitcoin are available. So, if many pension funds or large trillion-dollar asset managers decide to allocate “space” in their portfolios, this can have a huge impact on the cryptocurrency market.
The landscape is still uncertain. Central bankers are beginning to look at this market. Among central banks, 86% research and develop digital currencies. The Bahamas has been launching a national digital currency since last October, and both Sweden and China have been launching pilot projects since early 2020.
However, in the long run, central banks are unlikely to abandon their monopolies. And as long as there are governments and central banks that retain the power to regulate the money market, there will be little margin for Bitcoin as a means of payment to replace traditional currencies, Deutsche Bank concludes.