Switzerland’s Largest Bank Expects Crypto Winter That Could Last Years
UBS, the largest bank of Switzerland’s has warned about a crypto winter where prices crash and may not recover for years.
In a note to clients, bank analysts, headed by James Malcolm, come with multiple reasons why cryptocurrency might fade in the eye of investors this year.
The UBS analysts first warn that the Federal Reserve’s interest rate hikes have the effect that it will lower the attractiveness of cryptocurrencies, such as Bitcoin, as a good alternative store of value.
If central banks decide to actively handle inflation by raising interest rates as many financial experts believe they will do, the analysts add, Bitcoin will no longer serve as protection against rising prices. According to the team, government stimuli were a key factor boosting the prices of crypto in the first two years of the pandemic, 2020 and 2021.
Another warning stems from the UBS analysts claiming that due to its high volatility, investors are increasingly realizing that Bitcoin is not “better money” per se.
The analysts furthermore state that Bitcoin and other cryptocurrencies are not easily scalable because of its decentralized design. Also, they believe that Bitcoin’s limited supply of 21 M makes the currency inflexible. [The analysts miss out new innovations such as layered technologies making scaling possible, while also snubbing the smallest denomination of a Bitcoin, the Satoshi, equivalent to 100 millionth of a Bitcoin.]
Lastly, the UBS team describe regulatory concerns and warn that Widespread cryptocurrency speculation “inevitably invites closer oversight to guard consumers” and “protect financial stability.” In addition, they state that:
“High-flying stablecoins and defi [decentralized finance] projects seem almost sure to face bigger setbacks from authorities in the coming months.”
Currently the Biden administration is preparing a government-wide strategy which includes cryptocurrencies. Last week, Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, said that regulating crypto exchanges is a top priority for his agency.
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Source: igaming
