With a market value of $1 trillion, bitcoin is now "too important to ignore," Deutsche Bank said in its latest report today.
As long as it continues to attract asset managers and companies, the price of bitcoin is likely to continue to rise, according to the report.
Deutsche Bank estimates that less than 30% of bitcoin transactions are related to payments.For example, in 2020, 28 million bitcoin will change hands, equivalent to 150% of the total amount of bitcoin in circulation.Apple shares traded 40 billion shares, or 270% of the total.
In addition, the average amount of bitcoin exchanged in US dollars per day is only 0.05% of the Japanese yen and 0.06% of the British pound.
As a result, bitcoin is expected to remain volatile due to limited tradability.
Marion Labore, an analyst at Deutsche Bank, believes that bitcoin will continue to exist, but will maintain its price volatility, which is facilitated by bitcoin's low liquidity.
Marion labor explains that just a few extra large-scale purchases or sales can significantly affect the market balance of supply and demand. According to people's perception of its price, bitcoin will continue to rise and fall, which is the effect of the "Tinkerbell effect.".
"Fairy effect" is an economic term used to describe that when more people believe in something, it is more likely to happen.The term comes from the story of Peter Pan, where Tinker Bell exists because children believe in her.
Bitcoin is now another money management tool, according to the Deutsche Bank report.Recently, some listed companies have begun to convert cash in their Treasury into bitcoin as an alternative hedge.
In August 2020, for example, business analytics firm MicroStrategy converted $425 million of cash in its inventory into bitcoin.Company leaders believe that bitcoin, as the most widely used cryptocurrency in the world, is a reliable store of value, and they believe that "bitcoin will provide a better opportunity for return than holding cash and preserve our capital over time."
Square then spent $50 million on bitcoin.Several other companies have also followed suit, enhancing people's confidence in the use of special currency as a hedge asset.
On February 8, 2021, Tesla said it had invested $1.5 billion in bitcoin and would soon accept bitcoin as a form of payment for the purchase of vehicles.
Deutsche Bank says bitcoin must, like Tesla, translate its potential into real results.
Like bitcoin, Tesla has sparked countless debates about whether it is the future of the car or "dying fashion.".Over the past 18 months, sentiment has changed dramatically as Tesla has demonstrated its ability to deliver vehicles such as the model 3 on a large scale.
The report points out that the next two or three years should be a turning point for bitcoin.As people pay more and more attention to the development of digital currency, a consensus on the future of bitcoin may emerge.
The Deutsche Bank report concludes that bitcoin must prove its value as a means of payment to live up to its reputation.
Recently, bitcoin has attracted more and more attention from mainstream institutions. JPMorgan, the Wall Street investment bank, plans to launch a basket of bitcoin related products to provide customers with encrypted exposure.
A set of educational materials was distributed to customers to help them understand the basic knowledge, risks and potential of bitcoin and cryptocurrency.The largest public holder of bitcoin is grayscale, and its bitcoin trust fund may own 700000 bitcoins, accounting for 3.5% of total supply, according to a report released by Bank of America yesterday.Morgan Stanley became the first major US bank to provide access to bitcoin funds to accredited wealth management clients.
Source: Deutsche Bank