While urging investors to treat bitcoin and other cryptocurrencies with caution, Deutsche Bank’s CIO, Christian Nolting, said the industry is “here to stay.” However, the executive sees the impending launch of CBDCs as a major threat to bitcoin in terms of serving as a currency. Instead, he outlined the asset’s similarities to gold and its potential role as a store of value.
Crypto is Here to Stay
Deutsche Bank’s chief investment officer published a report on the current state of the crypto industry. In it, Nolting highlighted the growth experienced in the past few years and especially following the COVID-19 pandemic. Moreover, he believes digital assets are here for the long haul:
“I think that by now, it is clear that cryptocurrencies (in some form) are here to stay, but I would argue that they are far from a mainstream asset class.”
Approximately a year ago, prominent legacy investor Paul Tudor Jones III said he had a small percentage of his portfolio in bitcoin to fight the potential consequences of rising inflation. Ever since then, the cryptocurrency has been frequently breached in discussions about what kind of percentage investors should put in it.
Deutsche Bank’s CIO opined that while many have made valid arguments in favor of bitcoin to be used as an “important investment vehicle either in terms of portfolio diversification or inflation hedging,” it should be treated with caution. He sees the asset’s infamous volatility as the most significant obstacle before even larger adoption.
CBDCs, Gold, Store of Value
With countless nations reportedly developing central bank digital currencies (CBDCs), Nolting touched upon their future role in the financial world. In fact, he believes “governments and more digitally-aware populations may ultimately prefer to go with CBDCs,” instead of relying on the decentralized nature of bitcoin.
Some potentially harming legislative frameworks developed by world regulators could also reduce digital assets’ chances of serving as international payment instruments.
“A widespread introduction of CBDCs accompanied by higher regulation of cryptocurrencies could create a more challenging environment for crypto assets as some of their advantages compared to traditional financial assets would fade in the longer term.”
However, even if people avert from employing BTC as a payment method, the asset could still have a role as a store of value.
Nolting compared the primary cryptocurrency’s attributes with some of gold’s features – such as finite supply that has to be obtained by a form of mining. Consequently, he concluded that “it is understandable why many believe bitcoin could ultimately replace gold as a store of value.”