To classify the development of the original cryptocurrency Bitcoin, an analyst from Deutsche Bank not only draws on a famous quote from fashion mogul Karl Lagerfeld, but also uses the “Tinkerbell effect” to show where she thinks Bitcoin stands.
Bitcoin trend over?
Is bitcoin just a short-lived fad? At first glance, the cryptocurrency seems to have little in common with the fashion world. But Deutsche Bank analyst Marion Laboure finds the connection between the two worlds. In doing so, the Harvard lecturer draws on Karl Lagerfeld’s statement that “trendy is the last step before tasteless.” She finds evidence for this assumption in the volatility among cryptocurrencies, which has recently increased massively. Meanwhile, the latest example highlights how quickly digital coins can be out of trend: “It only took three months for Bitcoin to go from trendy to tasteless, and all it took for the cryptocurrency to go out of fashion was a tweet and a Chinese government statement,” Laboure writes in a note to clients.
Two devastating events for the bitcoin price.
Just a few days ago, bitcoin came under heavy pressure and lost most of its value in a very short period of time. The crash among cryptocurrencies in May was due to two announcements in particular, as Laboure indicated. On the one hand, Elon Musk tweeted that he would not accept Bitcoin as a payment method for Tesla purchases after all. The reason for this, he said, was environmental concerns, since mining Bitcoins is considered a power guzzler. This was preceded by numerous tweets in which Musk expressed his support for cryptocurrencies – in addition to Bitcoin, these were mainly dedicated to the fun currency Dogecoin.
On the other hand, a report from China was anything but well received by crypto investors and put further pressure on the prices: The Chinese central bank had announced that it would not allow digital currencies for payment purposes.
Tinkerbell effect swirls up value of BTC
In the phenomenon that was impressively observed in May, the Deutsche Bank analyst thinks she can recognize the “Tinkerbell effect.” “Bitcoin’s value will continue to rise and fall depending on what people think it is worth,” she wrote. To name such cases, the economist borrowed the name of the little fairy from the children’s story Peter Pan. The term is based on Peter Pan’s claim that Tinkerbell exists only because children believe she exists. Parallels can be seen here, “In other words, the value of Bitcoin is based entirely on wishful thinking,” Laboure concluded.
Cryptocurrencies as a means of payment
Going further, the analyst believes it is unlikely that cryptocurrencies will establish themselves as a means of payment. She estimates that less than 30 percent of BTC transactions are related to services or goods. The bear portion is said to be due to financial investors instead. Another industry where cryptocurrencies are used a lot is gambling.
A key issue, it said, is bitcoin’s limited tradability, which allows it to remain volatile. In 2020, 28 million Bitcoins changed hands – or 150 percent of the coins in circulation – according to MarketWatch. In contrast, there were 40 billion Apple shares, or 270 percent of the total securities. In doing so, Laboure notes that this situation predates the intervention of governments, which “are unlikely to give up their monetary monopolies.”
Trend classification still underway?
That bitcoin is not having an easy time in the traditional financial world is obvious. Proponents have always disagreed on whether it should serve as a store of value, like the precious metal gold, or as a means of payment, like fiat currencies. Sensitive reactions to prominent statements that trigger massive price fluctuations do not make the classification of the original cryptocurrency and altcoins any easier. Whether Bitcoin ultimately proves to be a Tinkerbell effect or can turn into a serious investment after all, the further trend development will show. But compared to the statements of the Deutsche Bank analyst, a study by asset manager Iconic Holding showed which overriding factors have a long-term effect on Bitcoin, Ether & Co.