The transparency and distributed nature of cryptocurrencies is often cited as one of their biggest attractions. Reuters reports that Deutsche Bank chief strategist Ulrich Stephan dismissed Bitcoin today though, warning investors that the cryptocurrency’s current bubble may not last and is unlikely to offer the same long-term security as regular stocks.
Instability
“I would simply not recommend this to the everyday investor,” Stephan said today.
Stephan’s comments come at a time when general interest in fintech and cryptocurrencies is growing. Fears of hyper-volatility and limited long-term relevance are starting to be dispersed by Bitcoin’s recent relentless upwards streak. While wobbles are still common, Bitcoin’s now seen by some as relatively stable and a candidate to lead future finance.
This comes as a concern to traditional lenders. Banks are worried that the rise in popularity of distributed cryptocurrencies could cause the eradication of centralised financial markets. They’re also having to defend against the growing numbers of fintech providers threatening to uproot the financial services industry. Stephan’s comments have been received sceptically by crypto markets who note the banking sector continues to rely on the same criticisms.
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Some banking leaders have recently attempted to drive a line between both arguments. UBS Chairman Axel Weber last week said he is “very cautious” about the use of Bitcoin as a credible currency.
However, he’s also “optimistic” about the potential of the underlying blockchain technology, a concept that’s now making its way into a diverse range of industries. As Webel sees it, the existing finance sector can modernise itself on top of the blockchain, mitigating the need for cryptocurrencies like Bitcoin.
Bitcoin bubble
Part of the problem around Bitcoin is it’s still relatively new and is in many ways unproven. It’s only in the past few years that cryptocurrencies have attracted mainstream attention from investors and financial markets. Bitcoin’s eight-fold value surge over the past year has considerably raised the stakes. Despite regular warnings of a bubble, Bitcoin’s currently continuing its upward trend and is predicted by some to reach $10,000 by the end of the year.
With the future potential of Bitcoin and the blockchain still unclear, bank leaders are erring on the side of caution and advising clients to stick with existing investments. Despite the warnings, some investors are beginning to treat cryptocurrencies seriously though, a trend which could lend extra credibility to the crypto markets.
