A Deutsche Bank analysis on Bitcoin by Marion Laboure and Galina Pozdnyakova was recently released.
Deutsche Bank likens Bitcoin more to diamonds than gold
The analysis covers Bitcoin’s current price trend, and also contains a forecast for the end of the year, but the most curious aspect is that Laboure and Pozdnyakova argue that BTC is more like a highly traded asset, such as diamonds, rather than a stable safe-haven asset such as gold.
In fact, it is quite evident that the price of BTC is too volatile to be called a stable safe-haven asset, like gold is, instead it is more like assets that are also traded heavily in the markets for speculative or investment purposes.
For example, the price of Bitcoin over the course of 2022 is underperforming both the stock and bond markets, and it is also performing worse than the commodity markets. The Deutsche Bank report says that the heavy drain of excess liquidity from financial markets, which the major Central Banks have been initiating for months now, has created downward pressure on its price. Gold, on the other hand, has held up significantly better.
Laboure and Pozdnyakova cite the story of De Beers, one of the world’s leading diamond producers, and in particular its advertising efforts to change consumer perceptions about diamonds.
They argue that it marketed an idea rather than a product, thus building a solid foundation for a $72 billion a year industry that they have now dominated for 80 years.
Then they add:
“What’s true for diamonds, is true for many goods and services, including Bitcoins”.
The analysis of the report’s authors
They also state that stabilizing cryptocurrency prices is very difficult because there are no common valuation models similar to, for example, those used in the stock market. They also point out that the crypto market is very fragmented, so much so that the free-fall in cryptocurrency prices may still continue precisely because of the complexity of their ecosystem.
In fact, there are a lot of cryptocurrencies competing with each other, which only weakens them during difficult times. Bitcoin to date has no real competitor, but this cannot be said at all for altcoins.
Laboure and Pozdnyakova also point out that the crypto market since November has been increasingly correlated to benchmarks such as Nasdaq 100 and S&P 500 high-tech, and this could also cause a rebound sooner or later, should the US tech markets rebound as well.
In fact, the report predicts that the S&P will return to January levels by the end of the year, and Bitcoin could also follow this trend by returning to $28,000.
The curious thing is that in September last year again Marion Laboure called Bitcoin “the 21st century gold”, but in light of what has happened since, she has had second thoughts.