Marion Laboure, a senior economist and market strategist at Deutsche Bank, said that Bitcoin, the world’s most-traded cryptocurrency, has the potential to transform into 21st-century digital gold.
Ethereum could be considered the equivalent of “digital silver,” she added.
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"I could potentially see Bitcoin to become the 21st-century digital gold,” Laboure said, adding that gold was also historically volatile. “But it is important to keep in mind that Bitcoin is risky: it is too volatile to be a reliable store of value today. And I expect it to remain ultra-volatile in the foreseeable future.”
Laboure identified three reasons for this volatility. First, it boasts limited tradability; second, approximately two-thirds of the cryptocurrency is applied for investment and speculation; and third, Bitcoin’s volatility will regularly fluctuate based on investors’ perception of Bitcoin’s value.
Still, the Harvard finance lecturer said that the market capitalization of crypto made the industry “too important to ignore,” but that it currently suffers from a lack of regulation and a poor environmental record. She gave the example of its growing annual electricity consumption, which in one year is roughly equivalent to the entire annual electricity consumption of the world’s fifth-largest country, Pakistan, which is home to more than 200 million people.
Laboure also cautioned novice investors to understand that Bitcoin had only a limited supply of Bitcoins in existence, capped at fewer than 21 million, with almost 90% of that supply already in circulation.
But she’s not surprised that Bitcoin has generated as much hype as it has, and believes that cash and cryptocurrency will coexist in the long-term.
“People have always sought assets that were not controlled by governments,” Laboure said. “Cash will certainly not disappear, but we expect it to decline as a means of payment.”