A market briefing for 2013 has just issued by Deutsche Bank, created by Chief International Economist Torsten Slok, listing 30 possible threats that could disrupt global markets in the next year. Bitcoin with “North Korea” and “Brexit” is one of them. Its inclusion in the briefing shows the extent the banking sectors are watching the digital currency, with some analysts to see it as an opportunity, while others as a threat.
Deutsche Bank has over 100,000 employees and annual revenue of $35 billion. Although the bank has its controversies (it was fined $245 million for money laundering this year and another $258 million for violating sanctions in 2015), it still has a dominant position of the glial banking world. The declaration of Chief Economists, particularly when they warn of possible market threats, the entire investment world are watchful.
Torsten Slok’s list of the 30 highest risks markets face in 2018 is interesting to read. The entries have not a particular order and include the house bubbling bursting, the increasing US inflation and the Russian Presidential election. Among others, Bitcoin has its entry. Explicitly, the entry states: “Bitcoin crash, confidence impact on retail investors.”
Torsten Slok’s primary concern is that the newcomers, e.g., institutional investors trading Bitcoin derivatives, could be damaged in case of a crash. The possibility of a crash is not unquestionable. It is a possibility, along with every entry on Slok’s list. At the beginning of 2017, few could have foreseen that Bitcoin has morphed into a global threat being taken seriously by the financial world.
On Thursday, Deutsche Bank posted a presentation regarding digital currencies on its website, which stated:
“We rank cryptocurrencies as a risky investment because recent price increases are in part based on speculation. Volatility is very high and reached 80%, and the whole sector is generally unregulated [….]there is an appreciable risk of major losses.”
The Deutsche Bank’s list fails to see the threat that Bitcoin faces. Bitcoin sucks the air out of the rest banking sector. Bitcoin is not going to render every other global asset class obsolete. However, if this meteoric rise continues, investments banks face a problem. No other stock, bond, or equity in history has performed as Bitcoin this year. Traditional assets that promise a 6-8% return look decidedly tame in comparison.
If Bitcoin were to crash the next year, it would scare off the money poured into the world after the Bitcoin Futures launching announcement. True Bitcoin holders and not just contracts holders will not shake out by a significant correction. They have experienced Bitcoin bears markets in the past, and they will show faith in the asset.