Recently, a senior economist for Deutsche Bank explained why Bitcoin will remain “ultra-volatile” in the foreseeable future.
According to a Q&A by senior economist and market strategist Marion Laboure, Bitcoin’s price volatility is the primary barrier to the digital asset being adopted as a twenty-first century form of gold.
Laboure says the massive price swings are likely to inhibit the cryptoasset’s ability to perform as an effective store of value asset for the “foreseeable future.”
I could potentially see Bitcoin to become the 21st century digital gold. Let’s not forget that gold was also volatile historically. 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 gave three primary reasons for Bitcoin’s continued price volatility, the first being that two-thirds of BTC are used for speculation and investment. Laboure also referenced Bitcoin’s limited tradability, saying that a “few additional large purchases” could significantly impact the market. Finally, she highlighted the psychology of market influence, saying “small changes in investors’ overall perceptions” are largely driving Bitcoin’s price swings.
Laboure commented on the differences she sees between Bitcoin and Ethereum, noting BTC’s first-mover advantage and network effect.
However, the senior economist said Ethereum has managed to support real-world applications, including non-fungible tokens, and referred to ETH as “digital silver” to Bitcoin’s gold.
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.