Deutsche Bank analyst and Harvard University lecturer Marion Laboure, quoted the late Karl Lagerfeld Wednesday in a scathing review of Bitcoin.
"It took bitcoin a mere three months to go from trendy to tacky, and all it took for the cryptocurrency to fall out of style was one tweet and a Chinese government statement," Laboure said.
Bitcoin's price dropped 28% this week, the fall triggered by an announcement from China and Elon Musk.
Tesla's CEO has brought Bitcoin's environmental disadvantages to the public's attention. Musk debuted as the "Dogefather" on NBC's Saturday Night Live two weeks ago. Dogecoin increased in value immediately after this appearance, and an enthusiastic tweet continued to have an impact on markets after that.
Just a few months after launching Bitcoin payment, Tesla revealed that it would no longer support it.
This week, China's central bank, the People's Bank of China, announced plans to impose further limits on cryptocurrency trading. These plans are an expansion of previously established rules from 2017. The announcement coincided with the escalation of environmental concerns surrounding bitcoin.
According to Labouré, Bitcoin's $1 trillion market cap makes it difficult to ignore, but the cryptocurrency's limited usefulness for transactions means that the "real debate is whether rising valuations alone can be reason enough for Bitcoin to develop into an asset class, or whether its illiquidity is an obstacle."
This is why, according to Labouré, "the value of bitcoin is entirely based on wishful thinking."
"Bitcoin's value will continue to rise and fall depending on what people believe it is worth," a phenomenon called the "Tinkerbell effect," because belief is critical.
According to Labouré, any form of cryptocurrency payment will take a long time to gain widespread traction. In the meantime, Bitcoin "would circulate and its value can remain volatile."
By Deutsche Bank's estimations, 30% of Bitcoin operation is for payments and the rest is for "financial investment." And despite its volatility, overall liquidity isn't particularly large. Last year, Apple's trading volume was 270% of its share count; for Bitcoin, the figure was 150%.
Despite the pessimistic forecast that cryptocurrencies will become irrelevant overnight, the rest of the market has recently recovered. Though Laboure acknowledged that Bitcoin may continue to rise and fall, she is skeptical about its long-term potential.
