Cryptocurrencies are becoming more and more popular in many people’s everyday lives. Despite strong fluctuations and spectacular collapses, the experts at Deutsche Bank see crypto on the way to becoming an integral part of financial normality.
• In “What is crypto’s new normal?” Experts take a close look at crypto market developments
• Recovery thanks to the “Tinkerbell” effect
• Cryptos are here to stay
In the first part of their three-part report series “The Future of Money”, Marion Laboure, senior strategist at Deutsche Bank, and Cassidy Ainsworth-Grace, analyst at Deutsche Bank Research, come to interesting insights about the crypto market. In their report “What is crypto’s new normal?” The experts take a close look at market events and also give an outlook on how they assess the future of cryptocurrencies as part of the financial system.
Advertising
Trade Bitcoin and other cryptos via CFD (also with lever)
At Plus500 you can bet on rising and falling crypto prices – even with leverage. Try the free demo account now!
Plus500: Please note the Hints5 about this advertisement.
2023: Year of recovery for Bitcoin & Co. thanks to the “Tinkerbell” effect
After cryptoassets reached record levels in 2021, 2022 was marked by a significant market collapse. In addition to rising inflation, there was also the monetary policy of central banks is a reason why investors withdrew their money from the crypto ecosystem. In addition, there was a series of bad news from major industry players, which culminated in the bankruptcy of the crypto exchange FTX. For Laboure and Ainsworth-Cassidy, however, this was a healthy process: “This ‘crypto winter’ was positive overall and brought the crypto ecosystem closer to the established financial sector,” said the experts. Despite these events, Labore and Ainsworth-Grace argue that cryptocurrencies and digital assets are here to stay and the value of Bitcoin will continue to rise and fall depending on people’s perceptions.
The market recovered in 2023. For Deutsche Bank analysts, a phenomenon called the “Tinkerbell effect” is also responsible for this. “The more people believe in something, the more likely it is to happen. […] “The Tinkerbell effect appears to have returned and Bitcoin and Ethereum have outperformed traditional assets this year,” they note in their report.
Headwind factors for cryptocurrencies
Nevertheless, cryptocurrencies like Bitcoin & Co. also have to contend with disadvantages. In addition to high volatility, this also includes the daily trading volume, which remains very limited despite the hype. The majority of Bitcoins are held by a few addresses known as “crypto whales,” according to the experts. Added to this is the high energy consumption – one Bitcoin transaction leaves an ecological footprint that is larger than that of 10,000 Visa transactions.
Skepticism about stablecoins
Some experts argue that stablecoins could be an alternative to risky, highly volatile and unregulated cryptocurrencies. After all, they are linked to a “stable” value such as the US dollar and are therefore inherently designed to have significantly lower fluctuations than traditional cryptocurrencies. Laboure and Ainsworth Grace do not view stablecoins uncritically: “Stablecoins are the lubricant of the crypto ecosystem, but they require compromises,” is their verdict.
According to their argument, stablecoins “could face a similar fate to exchange rate pegs, which fell victim to capital flight and reserve depletion as occurred in Latin America and Asia,” they note. “Macro liquidity withdrawals and interest rate hikes by major central banks coupled with regulatory pressure will test confidence.”
Institutional actors as market drivers
The experts see the fact that cryptocurrencies are not a temporary market phenomenon, but will become a permanent part of the financial system, in particular because large, institutional players are showing increasing interest in Bitcoin & Co. They refer in particular to the fund giant BlackRock and its application for a spot Bitcoin ETF, which can be seen as a pioneer for the applications of other market players such as VanEck, Wisdom Tree and Invesco, while ARK Invest and 21 Shares have since submitted applications for a spot -Ethereum EFT were submitted.
In March, the experts had already pointed out in their article “Digital assets – from exuberance to utility” that participants in the financial system must, on the one hand, learn from the collapses of the past, but at the same time remain “ready for market developments”. This summary has not changed in her most recent paper.
Editorial team finanzen.net
Selected leverage products on BlackRock
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on BlackRock
The leverage must be between 2 and 20
Advertising