Deutsche Bank: Due to the Complexity of the System, the Cryptocurrency Freefall may Continue
- Due to the system’s complexity, the freefall in the cryptocurrency markets may continue, according to research released on Wednesday by Deutsche Bank (DB).
- According to Deutsche Bank, there has been a significant increase in the correlation between the Nasdaq and S&P 500 stock indices and bitcoin (BTC).
- The bank claimed that because cryptocurrencies like Bitcoin are speculative, high-risk investments, they are impacted by central bank tightening.
While there is no one-size-fits-all answer to the question of whether or not the crypto market will continue to experience freefalls, it is important to consider the various complexities that exist within the system.
Deutsche Bank stated in a recent report that there are no common valuation models in place for cryptocurrencies, making it difficult to establish stability. In addition, the cryptocurrency market is highly fragmented, with a large number of players and diverse interests.
These factors make it challenging to predict what direction the market will take in the future. However, given the volatility of the market and the lack of clear regulatory oversight, it is possible that we will see further freefalls in prices.
This is particularly concerning given the high level of leverage that is often used in cryptocurrency trading. If prices start to fall, this could lead to a rapid and sudden increase in margin calls, which could further exacerbate any sell-off.
Deutsche Bank Crypto Price Prediction
The bank predicts that BTC might reach $28,000 by the end of the year based on its historical association with the S&P 500 and using a base S&P 500 price of 4,750.
The use of leverage also amplifies the potential for losses, as even a small move against an open position can lead to ruinous outcomes. This was seen during the sharp drop in prices in 2018 when many traders were wiped out after being caught on the wrong side of leveraged bets.
Finally, the report notes that crypto assets are often held as investments by individuals and firms outside of the traditional financial system. This makes it harder for regulators to stabilize markets if they experience a sharp downturn. In other words, if there is another major crash, it could be much harder for central banks to prevent it from spreading throughout the global economy.
Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.
