Cryptocurrency users have no love lost for financial institutions. This is especially true when it comes to Deutsche Bank, which is considered by many to be “too big to fail”. It now seems the bank’s Wealth Management arm is advising users not to invest in any cryptocurrency, especially not in Bitcoin. There are a lot of issues associated with these markets, including the high volatility, price manipulation, and even data theft. It’s a very interesting development, even though it remains to be seen if people will pay any attention to this warning.
Deutsche Bank Still Doesn’t Like Bitcoin
For as long as Bitcoin has existed, banks and other financial service providers have advised against buying any cryptocurrency. People who followed that advice to a fault have missed out on some of the best investment opportunities of the past decade. Even so, the markets are still prone to manipulation, speculation, and volatility. These are all very problematic aspects as far as Deutsche Bank’s Wealth Management arm is concerned. In a way, it is not surprising that they do not like Bitcoin or similar currencies in the slightest.
Deutsche Bank Wealth Management currently does not “recommend consumers invest in Bitcoin or similar currencies”. Instead, they see this market as something only speculative investors should pay attention to. While that is an interesting train of thought, any form of investment is always speculative first and foremost. No one makes an investment to retain their current value, as everyone hopes to get more money out of it as time progresses.
Moreover, the Wealth Management arm of Deutsche Bank is warning investors that buying Bitcoin could result in a “total loss”. It is true the Bitcoin price could hit $0 as easily as it could reach $100,000. Bringing down this market will be pretty difficult, though, especially considering that regulation has had no real impact. Even when an exchange is hacked, the markets shrug it off without any problem. Pushing the Bitcoin price down to zero is not impossible, but it seems highly unlikely at this point.
It is neither the first nor the last time financial “experts” have warned against the use of cryptocurrencies, though. This entire market has been fueled by speculation and hype for as long as people can remember. This does not just apply to cryptocurrencies, even though it is far more apparent in this particular industry as of right now. No one can deny there is a lot of risk associated with cryptocurrencies from an investment point of view. Even so, greater risks often result in greater rewards. It’s not hard to see why so many people are smitten with Bitcoin and similar currencies.
The most recent Bitcoin price fluctuations only confirm the statement by Deutsche Bank’s Wealth Management arm. After all, we saw the Bitcoin price rise to nearly US$20,000 and quickly drop to US$10,000 in the weeks afterward. This doesn’t mean the Bitcoin price won’t rise to US$20,000 or more again in the future, though. For now, it is evident there is plenty of manipulation and volatility in the markets. The lower price is an excellent value for new investors, though, as it is unlikely the price will go much lower at this point.
Last but not least, Deutsche Bank’s Wealth Management spokespeople like to state that traditional money is backed by the underlying economic power of a country. That is an interesting, albeit incorrect statement. There is literally nothing backing the value of fiat currency in most countries right now. Paper money and coins represent a promise made by the country’s central bank to honor the value of that bill or coin. Nothing prevents the government from breaking this promise in the future. Bitcoin and other cryptocurrencies are not regular money, but that doesn’t have to be a bad thing.