• Bitcoin could recover to $28,000 by the end of the year, Deutsche Bank said in a recent note.

• That's based on the cryptocurrency's correlation with stock prices and the bank's view that the S&P 500 will rebound.

• "Bitcoin's performance during this tightening cycle will be a key test for its ability to be regarded as a separate asset class."

Bitcoin has fallen back below $20,000 as stocks continue to sell off, but the cryptocurrency could be poised for an end-of-year rally to $28,000, Deutsche Bank said in a recent note.

The world's biggest crypto by market cap has tumbled more than 70% from its high, and the broader sector has shared in the turmoil. The bank's analysts noted that tokens have become more correlated with the tech-heavy Nasdaq Composite and the S&P 500 this year.

In fact, while bitcoin has been described as digital gold, Deutsche Bank said it actually resembles another exotic asset more closely: diamonds. Like diamonds, bitcoin has no inherent value, but mining and trading company De Beers changed perceptions with clever marketing, analysts said.

"What's true for diamonds, is true for many goods and services . . . including bitcoins," according to the note.

The note comes as cryptocurrencies continue to struggle to regain lost ground amid the overall market turmoil. The total market capitalization for cryptos fell below $1 trillion on June 13 from a high of $3 trillion and hasn't shown much resilience since.

As the Federal Reserve and central banks across the globe have raised rates to tame inflation, cryptos have suffered. Bitcoin has ticked down to $18,000 territory twice this past week.

"Bitcoin's performance during this tightening cycle will be a key test for its ability to be regarded as a separate asset class," analysts said.

Investors are hoping a bottom is near for the crypto market. And bitcoin's correlation with stock prices can also work to the upside as well as the downside.

Deutsche Bank has a baseline view that the S&P 500 will rebound to 4,750 by the end of 2022. But analysts also considered "a range of scenarios" and concluded that bitcoin could finish the year at $27,000 to $28,000.

"This would be a 32% rally from its current price, but still less than half of its all-time high last November," the said.

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