“too important to ignore”
Bitcoin is now too important to ignore given its $1 trillion market capitalization - Deutsche Bank Report.
The informative Deutsche Bank report states that the price of bitcoin could continue to rise if it sustains the interest of the buy side; asset managers and companies that are keen to enter the crypto currency market. In a world Economic Forum report in December 2020, it was revealed that Deutsche Bank was planning to develop a fully integrated custody platform for institutional clients and their digital assets.
Volatility is still considered an issue with Bitcoin due to limited liquidity and tradability. An estimation from Deutsche Bank pegs Bitcoin related payments and settlements at sub 30% of the transactional activity on the Bitcoin chain. Eyeballing the transactional figures and statistics for 2020, it was observed that 150% of the total Bitcoin market supply was moved compared to 270% of Apple shares that changed hands. Also a comparison of the daily average number of Bitcoin exchanged for the USD came in at only 0.05% of the Yen and 0.06% of the GBP exchanged for the USD.
The rising valuation of Bitcoin has been exponential and considering the liquidity limits discussed above, the overarching inquiry amongst analysts is indeed whether Bitcoin can evolve into a true asset class. Deutsche Bank is curious to see how Bitcoin will transform its potential into results; perhaps it could take a que from a disruptor such as Tesla.
(The future of Tesla as an innovative and sustainable car manufacturer was questioned and labelled a fad but Tesla was able to deliver its Model 3 line up of cars on a large scale. Tesla was easily able to provide value and change the consumer and economic sentiment).
The Deutsche Bank report pushes the point further by querying whether Bitcoin’s current valuation has the broader shift toward cross-border digital currencies already priced in. “Bitcoin has to unleash its value as a means of payment to live up to its reputation” the Deutsche Bank’s paper concludes.
“Penny drop”
On the other hand the coin has dropped (pun intended) for Central banks and Governments with the sudden realisation that Bitcoin and other cryptocurrencies are here to stay. These institutions are expected to produce regulatory legislation on crypto currencies by late 2021.