2021-03-21 20:30:01
Next 2-3 Years 'Should Be a Turning Point for Bitcoin' - Deutsche Bank. The next few years might prove crucial for bitcoin (BTC) that is "here to stay" but is not likely to be used as a means of payment, according to German multinational giant Deutsche Bank.
Bitcoin’s market capitalization of more than USD 1trn “makes it too important to ignore,” while large players who buy and sell BTC have “considerable” market-moving power, said the March 2021 report prepared by Deutsche Bank Research. The coin’s price could continue to rise as long as asset managers and companies continue to enter the market.
So in the short term, bitcoin “is here to stay,” though its value will remain volatile due to its limited tradability, small tactical asset allocations, and the entries and exits of large asset managers. However, according to the authors of the report, in the long term, BTC will have to “transform its potential into results to sustain its value proposition.”
“The next two or three years should be a turning point for Bitcoin; consensus about its future may emerge as people monitor digital currency developments,” the researchers said.
For now, according to them, bitcoin’s current valuation is pricing in a shift toward cross-border digital currencies and the hypothesis is that BTC, as the leader, will benefit from network effects and become an important means of payment in the future.
The researchers argued that "the race is fierce" for cryptos to become a mainstream means of payment – BTC is an illiquid asset rarely used as a means of payment, while yet to be launched Facebook-backed Diem is focused on consumer adoption and real usage of money, it said. Furthermore, many countries have moved to create their central bank digital currencies (CBDCs).
Therefore, in the medium to long run, because of strong network effects, it’s unlikely cryptos will be used as a widespread means of payment, said the report, adding:
“And as long as governments and central banks exist and hold the power to regulate money, there will be little room for bitcoin—as a means of payment—to replace traditional currencies.”
However, US Federal Reserve Chairman Jerome Powell, said, citing a recent report from the Bank for International Settlements and a group of seven central banks, that a CBDC "needs to coexist with cash and other types of money in a flexible and innovative payment system."
In general, due to its volatility, most merchants don’t want to accept cryptocurrencies as a payment method. Consumers might use providers to own/trade the asset – but mainly for investment, said the Deutsche Bank report.
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