Deutsche Bank sees Bitcoin returning to US$28,000 by year end

Deutsche Bank sees Bitcoin returning to US$28,000 by year end
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(June 30): Given how closely it has been trading with US stocks, Bitcoin could reach as high as US$28,000 (about RM123,326) by the end of the year, according to an analysis from Deutsche Bank.

Bitcoin, the world’s largest digital token, has slumped in 2022 amid a risk-off mood driven by rate hikes and inflation fears. The analysis by Marion Laboure and Galina Pozdnyakova suggests a more-than 30% rally from the coin’s Wednesday (June 29) trading level of around US$20,000, though even that price point leaves the token trading at less than half its November peak.

Cryptocurrencies have been (since November) increasingly correlated to benchmarks like the tech-heavy Nasdaq 100 and the S&P 500, according to Laboure and Pozdnyakova. The bank’s strategists predict the S&P will recover to January levels by year end and Bitcoin may come along for the ride.

The digital currency is more like diamonds — a highly marketed asset — rather than gold, a stable safe-haven commodity, the duo wrote.  

Bitcoin failed to live up to predictions by pundits and market-watchers that it would prove to be an investor refuge, posting losses of more than 50% this year. Digital coins have underperformed stocks, bonds and commodities during the market-wide rout as the removal of excess liquidity by major central banks created downward pressure on their prices. Gold, on the other hand, held up much better. 

Laboure and Pozdnyakova tell the tale of De Beers, a major player in the diamond space, which was able to change consumer perception of diamonds thanks to its advertising efforts.

“By marketing an idea rather than a product, they built a solid foundation for the US$72 billion-a-year diamond industry, which they have dominated for the last eighty years. What’s true for diamonds is true for many goods and services, including Bitcoins,” they said. 

The analysts also pointed to some of the troubles that had gripped the crypto space in recent weeks, including turmoil at certain digital-asset hedge funds and lenders. 

“Stabilising token prices is hard because there are no common valuation models like those within the public equity system. In addition, the crypto market is highly fragmented,” they said. “The crypto free fall could continue because of the system’s complexity.”