Bitcoin is a “Digital Diamond,” says Deutsche Bank

By the end of the year, according to Deutsche Bank analysts, Bitcoin will cost $28,000. According to research conducted by Deutsche Bank, Bitcoin is more analogous to diamonds than it is to gold, an asset that is seen as a safe haven but is largely reliant on marketing. The idea that Bitcoin is digital gold has been disproven, according to the report, because the most well-known cryptocurrency has already lost more than 50% of its value this year.

Is the belief that bitcoin is a digital form of gold still prevalent?

There is a good reason why Bitcoin enthusiasts and cryptocurrency specialists refer to the most popular cryptocurrency as “digital gold.” Despite its extreme short-term volatility, Bitcoin has historically performed well over the long term. This is true even though the short-term volatility of its price is very high.

Nevertheless, despite its surging prices and growing geopolitical volatility, Bitcoin has performed poorly this year compared to other risk investments. The Federal Reserve’s aggressive approach to taming inflation has also had a negative impact on the biggest cryptocurrency.

The price of Bitcoin has surpassed the crucial psychological threshold of $21,000 while this story is being published. Over the last 24 hours, this represents a gain of more than 4%. The most well-known cryptocurrency has also decreased in value by 58.8% since the start of the year, greatly trailing gold, which has decreased in value by only 0.79 percent.

All of this could indicate that Bitcoin has fallen short of its potential to serve as a safe haven or a form of digital gold. Given this, experts at Deutsche Bank Marion Laboure and Galina Pozdnyakova contend that Bitcoin ought to be referred to as a “digital diamond.” The two persons argued that Bitcoin and diamonds are similar in that both rely significantly on marketing. Diamonds are another product that is widely advertised.

They compared Bitcoin to De Beers, the most prosperous diamond company in the world, which led an ad campaign in the late 1950s that would go on to become a cultural touchstone and transform the diamond business. As they put it:

They created a strong basis for the $72 billion annual diamond industry that they have dominated for the past 80 years by marketing an idea rather than a product. The same is true for many products and services, including Bitcoins, as it is for diamonds.

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The predicted price of bitcoin for the year is $28,000.

By the end of the year, the analysts at Deutsche Bank said that the price of Bitcoin, which has become more closely correlated with indices like the S&P 500 and the heavily weighted Nasdaq 100 for technology, may recover to $28,000. This is due to their conviction that the S&P will revert to its January levels before the year is out, and that Bitcoin would likely follow the index.

Notably, JPMorgan’s financial analysts predict that the current deleveraging phase in the bitcoin industry will come to an end soon. They said that the liquidity crisis at hedge fund Three Arrows Capital “is a manifestation of this deleveraging process,” stating that it should not be surprising that some leveraged crypto firms are collapsing in the wake of the recent market disaster. As they put it:

“Given that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion [and that venture-capital funding], an important source of capital for the crypto ecosystem, continued at a healthy pace in May and June,” the current deleveraging cycle “may not be very protracted.”

The worst is now behind cryptocurrency, according to JPMorgan analysts who claim that their net leverage meter, which measures the ability to borrow money, suggests that “deleveraging is already well underway.”