Deutsche Bank says bitcoin's gone from 'trendy to tacky.' Here's what it expects to happen next

Published Fri, May 21 20213:32 AM EDT

LONDON — For Deutsche Bank , bitcoin has lost its flair. Bitcoin suffered a huge plunge this week that saw the digital currency fall to three-month lows. It dived 30% to nearly $30,000 at one point on Wednesday, before paring losses later that day. On Thursday, bitcoin bounced back above $40,000 as the crypto market attempted to recover. Bitcoin was last trading 1% lower at a price of $39,703 on Friday, according to Coin Metrics data. Deutsche Bank Research Analyst Marion Laboure thinks the sell-off was a long time coming. And she believes there could be more trouble ahead for the cryptocurrency market as it reaches a critical point. In a note to clients Thursday, Laboure wrote that bitcoin has gone from "trendy to tacky" in just three months. "As fashion mogul Karl Lagerfeld pointed out, 'Trendy is the last stage before tacky,'" Laboure said. "And what's true for glamour and style might also be true for Bitcoin." "Just as a 'fashion faux pas' can happen suddenly, we just received the proof that digital currencies can also quickly become passé," she added. Laboure explained the main drivers behind bitcoin's downfall of late were a single tweet from Tesla CEO Elon Musk and a regulatory crackdown in China . She added that bitcoin's sudden collapse Wednesday "should not come as a surprise." "It is no surprise that governments are not inclined to give up their monetary monopolies," said Laboure. "Throughout history, governments first regulate and then take ownership." "As cryptocurrencies begin to seriously compete with regular currencies and fiat currencies, regulators and policymakers will crack down." The latter half of 2021 and early 2022 could mark a "turning point for cryptocurrencies" as regulators have made them a "key priority," Laboure added. She alluded to Diem, formerly known as Libra, a digital currency project backed by Facebook. Diem was met with swift backlash from politicians and central bankers around the world when it was first announced in 2019. The group overseeing the coin's development has since decided to move its operations from Switzerland to the U.S. and focus on building a scaled back version of its original concept . Meanwhile, central banks are working on digital currencies of their own. The People's Bank of China is leading the pack, launching trials of its digital yuan in several regions, while the central banks of Sweden, the U.K. and other countries are also looking into potential central bank digital currencies, or CBDCs . Environmental concerns could also weigh on the prices of bitcoin and other cryptocurrencies, according to Laboure. On May 12, Musk said Tesla had suspended bitcoin payments due to the huge amounts of energy required to process transactions with the cryptocurrency. Musk "wasn't saying anything new," Laboure said, adding: "We have known for a long time that mining bitcoins requires a tremendous amount of energy. As of early 2021, Bitcoin's annual electricity consumption was nearly the same as many nations .&qu