Deutsche Bank says it expects bitcoin to remain "ultra-volatile" due to its limited tradability, adding that just a few large purchases or market exits could significantly impact the cryptocurrency's supply-demand equilibrium.
In a recent report, the firm's research team pointed to the cryptocurrency's illiquidity - which features a set 21 million supply - as an obstacle. Thus far, around 18.7 million or 89% of bitcoins in total circulation have been mined. That expected year for all bitcoins to be mined is 2140, roughly a century from now
"As an investment asset, bitcoin liquidity remains low," the report said. "In 2020, 28 million bitcoins changed hands (150% of total bitcoins in circulation), compared to 40 shares of Apple (270% of its total shares in circulation)."
The heart of the comparison between bitcoin - often referred to as digital gold - and gold boils down to the supply angle, in which both are limited, the report said. One major marginal driver of the price, therefore, becomes the demand.
DB also raised questions surrounding bitcoin's rising valuation and whether it is enough for the cryptocurrency to evolve into an asset class. But a turning point may be in the next two to three years, the group said, after more clarity about the cryptocurrency emerges.
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"Bitcoin's market cap of $1 trillion makes it too important to ignore," the report said. "Some people think bitcoin is a commodity. Others think it is a currency. A few think it is a stock. Nevertheless, its market cap is among the top 10, both as a currency and as a stock."
Bitcoin has seen its price skyrocket 600% year-to-date amid divided opinion on whether it is in a speculative bubble waiting to burst or an asset that's here to stay. It has staged an epic run in March, hitting a $1 trillion market value yet again, and reaching a new peak above the $60,000-level, after an already-robust February.
As of Friday afternoon ET, bitcoin traded around to $58,700.
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