One of the largest banks in the world is confident that a new era is beginning in the history of mankind, inflation and the influence of the younger generation in society will grow. This could have a beneficial effect on the cryptocurrency industry, but there are also things that threaten it.
The era of globalization is coming to an end, and it is being replaced by an “age of disorder,” according to Deutsche Bank, the largest financial conglomerate in Germany in terms of assets. The company believes that the state of affairs in the international arena, public opinion and other aspects will change in the coming years. All this, to one degree or another, can accelerate the recognition of bitcoin and other cryptocurrencies.
Deutsche Bank predicts that inflation will rise significantly in the coming years. Central banks will continue to print money to deal with crises and surging debt. The injection of liquidity into the markets and the economy will lead to a gradual depreciation of national currencies. Such a policy will play into the hands of bitcoin and other cryptocurrencies, says Anatoly Knyazev, co-founder of EXANTE. BTC emission is limited to 21 million coins, and the rate of their production drops every four years thanks to halving. This makes the main digital coin inflation-proof.
“The current position of central banks to inject liquidity into the economy will undoubtedly be reflected in the value of assets. Probably, such a situation will lead to global inflation, a decrease in the value of money and the growth of stock markets. Without a doubt, cryptocurrencies will enter the top 3 most popular financial instruments, "Knyazev is sure.
Gleb Kostarev, head of Binance in Russia and the CIS, adheres to a similar position. From his point of view, the growth of the money supply and inflation will increasingly cause distrust of the traditional monetary system and fiat currencies.
Deutsche Bank believes that the influence of the younger generation on the state of affairs in society will increase. Millennials and younger people will catch up with their elders by 2030, allowing them to have more voting power in democratic elections. Probably, a gradual increase in the proportion of young people in society will have a positive effect on the recognition of cryptocurrency.
For example, Ruchir Sharma, global strategist and head of emerging markets at Morgan Stanley, told CNN that stimulus measures are pushing investors to seek alternative assets to build capital. At the same time, the younger generation is increasingly choosing bitcoin instead of gold.
Knyazev added that cryptocurrencies respond to key queries of the modern generation. These include:
- lack of regulation
- not subject to governments
- controlled inflation (in the case of bitcoin)
“Generation change is a powerful resource for change. The new generation will undoubtedly change the investment landscape compared to the previous generation – even now bank deposits are losing their attractiveness and giving way to brokerage accounts, ”Knyazev said.
But there are also negative prerequisites. Deutsche Bank suggested that the coming era could negatively affect the stock markets. If the period of globalization was remembered for the record cumulative growth in asset values, then the “age of disorder” threatens current global assessments. This state of affairs may be unfavorable for the cryptocurrency market, noted Nikita Zuborev, senior analyst at Bestchange.ru. During the current crisis, digital assets have shown a high correlation with the stock market, and this may remain in the future.
“The market is already showing a strong correlation between cryptocurrencies and stock markets, although there is no direct relationship. Therefore, we have assumptions that the crypto market will continue to react to current events in about the same way as traditional markets – if the financial crisis continues, cryptocurrencies may suffer no less than the stock market, ”Zuborev warned.
He clarified that the de-globalization predicted by Deutsche Bank could also negatively affect the recognition of digital assets. Cryptocurrency was conceived as a decentralized currency outside the control of any country's government. If the trend that began with the outbreak of the pandemic continues, and countries increasingly close themselves off from each other in the economic aspect, then the idea of a new world currency will become less relevant.
Kostarev, on the contrary, admitted that the process of globalization will only accelerate. The coronavirus pandemic has helped companies adapt to telecommuting, making national borders less meaningful. This is beneficial for cryptocurrencies.
“Cryptocurrencies are the next step in globalization. And despite the fact that the coronavirus slowed down this process for a while, globalization will not go anywhere, but on the contrary, it will only accelerate. Indeed, it was during the coronavirus period that many companies began to practice remote work, which means that the link to a specific country is becoming weaker, because you can work remotely from anywhere in the world, ”said Kostarev.
He stressed that even the presence of positive prerequisites for the recognition of cryptocurrencies does not mean that one can bet on bitcoin. It is difficult to predict which digital assets will gain popularity and will be in demand among the audience. The market is still very young and is only at the beginning of its journey. Knyazev agreed with this point of view and proposed to consider not only BTC for investment purposes, but to look for other, promising projects.
“Bitcoin is a cryptocurrency blue chip that will benefit from all the growth benefits of cryptocurrencies. However, it is likely that over time, other, more promising projects will come to the market. Therefore, when buying cryptocurrency for an investment portfolio, you need to think about which projects can complement it, and which ones should get rid of, "Knyazev advised.
He added that there is another threat to cryptocurrencies in Deutsche Bank's predicted future – central bank digital currencies. If there are any, it could shift bitcoin and other coins into the commodity category. This is possible even in countries where cryptocurrencies have already been legalized as a means of payment.
In March, analysts at one of the oldest US cryptocurrency exchanges, Kraken, predicted a rise in the price of bitcoin to $ 350,000 by 2044. This will happen thanks to the change of generations. In the next 25 years, young people will receive national wealth, part of which will be invested in cryptocurrency.