Bitcoin (BTC) has experienced a breakout year in institutional adoption, thanks in part to the introduction of several spot BTC exchange-traded funds (ETFs) in the U.S. According to Deutsche Bank’s senior economist Marion Laboure, Bitcoin, often referred to as “King Crypto,” could evolve into the modern-day equivalent of gold.
Laboure, who also lectures in finance and economics at Harvard University, shared insights during a client Q&A session. She pointed out Bitcoin’s appeal in a world of inflating fiat currencies, emphasizing its limited supply. “The maximum number of Bitcoins that will ever exist is just under 21 million, and approximately 94% of that total is already in circulation,” she explained. This contrasts sharply with fiat currencies, where central banks can increase supply, a trend that has accelerated in recent years.
Addressing the practicality of using Bitcoin for everyday transactions, Laboure noted that while some shops accept cryptocurrencies, Bitcoin is not yet widely used for purchases like food or clothing. Despite recent technological advances that allow faster and cheaper Bitcoin transactions, it still takes about ten minutes to validate a transaction, and fees can spike dramatically during periods of high network activity. In April, median transaction fees exceeded $90.
Originally intended as a peer-to-peer currency, Bitcoin’s role has evolved over time. “It is no longer primarily viewed as a means of payment but has not yet achieved the stability of gold,” said Laboure. However, she acknowledged its potential, stating, “People have always sought assets outside of government control. Gold has fulfilled that role for centuries, and I could see Bitcoin becoming the 21st-century digital gold.”
However, Laboure warned that Bitcoin remains highly volatile, which makes it a risky store of value for now. “I expect it to stay ultra-volatile for the foreseeable future,” she added.
When discussing the key differences between Bitcoin and traditional fiat currencies, Laboure stressed that fiat currencies are backed by governments and are legal tender, which creates a legal obligation to accept them as payment. “This is not the case for any private cryptocurrency, with El Salvador being the main exception after its adoption of Bitcoin as legal tender.”
Laboure identified three reasons why Bitcoin is now considered more of a store of value than a transactional currency. “First, two-thirds of Bitcoins are used for investments and speculation. Second, Bitcoin’s limited tradability means that large purchases or market exits can dramatically affect its price. Finally, its value fluctuates with market perceptions, where even small changes in sentiment can have a big impact.”
Despite Bitcoin’s potential, Laboure pointed to its major challenges, notably the lack of regulation. “This was an advantage for early adopters but now deters many investors and businesses from entering the market,” she said. Additionally, Bitcoin’s environmental impact is significant, with its annual electricity consumption comparable to that of Pakistan, a country of 217 million people.
Laboure sees progress on both fronts. Technological advancements could help make cryptocurrencies greener, while regulatory clarity is expected to improve, particularly with the rollout of the EU’s Markets in Crypto Assets (MiCA) and potential changes in U.S. policy after upcoming elections.
Addressing the differences between Bitcoin and Ethereum (ETH), Laboure likened Bitcoin to “digital gold” and Ethereum to “digital silver.” While Bitcoin is the most traded and well-known cryptocurrency, Ethereum has a broader range of applications, including decentralized finance (DeFi) and non-fungible tokens (NFTs).
Asked whether a new cryptocurrency could rival Bitcoin or Ethereum in the next five years, Laboure expressed skepticism, citing the “network effect.” Bitcoin’s first-mover advantage and Ethereum’s real-world use cases make it unlikely that a new token will surpass them.
Looking ahead, Laboure envisions a future where central bank digital currencies (CBDCs), cash, and cryptocurrencies coexist. “While cash will not disappear, its use as a payment method will decline. Most G20 countries are planning stricter regulations on private cryptocurrencies while speeding up digital cash initiatives,” she concluded.
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