Deutsche Bank: BTC as the gold of the 21st century

BTC as the gold of the 21st century and ETH as digital silver – the analyst at Deutsche Bank Research is optimistic about cryptocurrencies.

In the video “Will BTC Become Digital Gold?” relates the analyst at Deutsche Bank Research, Marion Laboure, commented on this very question. In their opinion, there are two reasons to believe that BTC could become a form of digital gold. In addition, in the interview she compares BTC with gold and ETH with silver and predicts that cash, cryptocurrencies and digital central bank currencies will coexist in the future.

BTC as a human need

There are two reasons why people see BTC like gold. On the one hand, Labore explains, people have always felt the need to invest their wealth in something unusual and not controlled by governments. So far, gold would have come first. BTC could possibly also meet this need in the future. On the other hand, it would have deflationary properties that offer protection against inflation. According to the analyst, these come about because of this:

The amount of BTC is limited. The maximum number that will ever exist is 21 million pieces. And around 89 percent of the total BTC supply is already in circulation. With many fiat currencies, the central banks control the money supply and they have increased it significantly in recent years.

Marion Laboure, analyst at Deutsche Bank

The gold price has also fluctuated considerably in the past. Even so, the analyst and Harvard lecturer warns that BTC prices will remain volatile. Too volatile to be considered a reliable investment.

BTC price is and remains volatile

Labore cites the reason for this statement, the fact that so far “two thirds of Bitcoins are used for investments and speculation”. In addition, large purchases or market exits could “significantly affect the balance between supply and demand”. Plus – BTC’s value depends to a large extent on what people think of BTC based on their expectations and beliefs.

Nevertheless, a control is required

She sees the establishment of regulations and a reduction in the energy consumption of BTC as the basic prerequisites for a larger-scale BTC adaptation by investors and companies. In doing so, she promises that 2021 “will be a turning point and that a large number of economies will regulate cryptocurrencies by 2022”. On the other hand, she hopes that “technical progress” will address the ecological footprint.

However, she does not see these weaknesses solely in BTC, but generally as a disadvantage of crypto currencies.

Dominance: BTC and ETH

Regardless of energy consumption and regulation, the analyst does not see the supremacy of BTC followed by ETH at risk in the next 5 years. The strength of BTC lies in the fact that it was the first cryptocurrency. In addition, it would be the most traded today and would have the highest level of awareness. In the eyes of Labores, second place goes to ETH. This cryptocurrency could benefit greatly from the network effects thanks to its various areas of application. The analyst seems to choose the applicability of the cryptocurrencies along with their respective market capitalization as core criteria. With these she would at least have a reason for the following statement:

If BTC is sometimes referred to as “digital gold”, then ETH would be “digital silver”!

Marion Laboure, analyst at Deutsche Bank

One could counter this by stating that ETH is closer to gas or another fossil raw material. One possible reason for this classification is that the ETH Blockchain with its smart contracts is primarily used for applications and not, like gold or silver, for store of value. Instead, the role of “digital silver” speaks more for projects like Litecoin, whose properties of value retention and usability are more similar to those of BTC.

No financial disruption

Although BTC and ETH are products that can no longer be ignored simply because of their market capitalization, Labores sees no danger for currencies or cash. When asked whether cryptocurrencies would replace conventional means of payment, she replied:

I am not assuming that this is the case. CBDC, cash and cryptocurrencies will coexist. Cash will certainly not go away, but we expect it to become less important as a means of payment. Most G20 countries plan to regulate private cryptocurrencies more strictly. In the past three years, efforts by central banks and governments around the world have accelerated.

Marion Laboure, analyst at Deutsche Bank