Bitcoin's $1 Trillion Market Cap Makes It Too Important to Ignore
Deutsche Bank Research has released a report titled "Bitcoin: Can the Tinkerbell Effect Become a Self-Fulfilling Prophecy?" as part of its "Future of Payments Series 2." Research analyst Dr. Marion Laboure stated that Bitcoin's market capitalization of $1 trillion makes it "too important to ignore." She wrote: "As long as asset managers and companies continue to enter the market, Bitcoin prices could continue to rise." At the time of writing, Bitcoin was trading at $57,455 with a market cap of approximately $1.07 trillion.
Global Rank: Third-Largest Currency by Circulation
The report compares Bitcoin to commodities, currencies, and equities, emphasizing its monetary characteristics. Laboure noted: "In terms of total currency in circulation, Bitcoin is the third-largest in the world, after the U.S. dollar and the euro." This surge is attributed to Bitcoin's rapid price appreciation: in early 2019, Bitcoin represented only 3% of U.S. dollars in circulation, but by February 2021 that figure had risen to over 40%. The Japanese yen ranks fourth, followed by the Indian rupee.
Tinkerbell Effect and Regulatory Outlook
Laboure explained that Bitcoin's value will continue to fluctuate based on collective belief, a phenomenon described as the "Tinkerbell Effect." She added: "Central banks and governments understand that cryptocurrencies are here to stay, so they are expected to start regulating crypto-assets late this year or early next year." The report also notes that central banks are accelerating research on central bank digital currencies (CBDCs) and launching pilots.
Short-Term Volatility, Long-Term Challenges
In the short term, Laboure believes Bitcoin is here to stay and its price will remain highly volatile. Over the medium to long term, she argues that strong network effects will limit the use of cryptocurrencies as widespread payment methods. "In the long run, central banks are unlikely to give up their monopolies," she warned. "As long as governments and central banks hold the power to regulate money, there will be little room for Bitcoin—as a means of payment—to replace traditional currencies."