The bitcoin craze could pose a real risk to the broader market next year, according to Deutsche Bank.
Torsten Slok, the firm’s chief international economist, sent to clients a list of significant risks to the market in 2018. Included on that list: A crash in the price of bitcoin, higher inflation and the threat of North Korea.
Bitcoin has emerged as a financial phenomenon this year as the digital currency sees $1,000-plus swings within hours. At this juncture, as the cryptocurrency has advanced quadruple digits this year, Slok said the markets have not correctly priced in the broader impact bitcoin could potentially have.
Deutsche Bank’s risks to the market in 2018
“It is something that I think financial markets so far have been discounting as a small issue,” the economist said Thursday on CNBC’s “Trading Nation.” He said he worries about whether bitcoin and its wild price swings could become “more systemic” next year if the current trends continue.
“The worry, of course, that one can have is that it’s catching on quite substantially. And of course with the speed with which prices are going up, then you do wonder where prices will be even by the end of 2017. But we do think that in 2018, this, of course, will continue to be a topic, and there are a number of questions that remain unanswered,” Slok said.
Specifically, questions persist around regulation of the cryptocurrency and transparency in what exactly investors hold, Slok said.
The cryptocurrency’s price rose above $19,000 for the first time on Thursday before tumbling more than 20 percent, according to Coinbase data.
Its volatility could intensify in days ahead as exchanges prepare to launch bitcoin futures trading.