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Switzerland’s largest bank UBS has warned of a cryptocurrency winter, when prices will plummet and may not recover for years. Analysts at the bank explained several main factors affecting the price of cryptocurrencies.
UBS expects crypto winter to last for years
Switzerland’s largest bank UBS has warned that a crypto winter will see a price crash that may not recover for years.Bank analysts led by James Malcolm recently explain In a note to clients, there are several reasons why cryptocurrencies may lose their appeal to investors this year.
First, UBS analysts detailed that a Fed rate hike would make cryptocurrencies such as Bitcoin less attractive to many investors who see the asset class as a good alternative store of value.
Analysts added that if central banks take steps to control inflation, investors may not hold bitcoin to protect against price increases. They pointed to government stimulus as a key factor driving cryptocurrency prices higher in 2020 and 2021.
The Fed is expected to raise interest rates several times this year.JPMorgan Chase CEO Jamie Dimon recently Say The Fed may have to raise short-term interest rates more than four times this year. Goldman Sachs also expects the Fed to raise interest rates four times this year.Wharton finance professor Jeremy Siegel Say Earlier this month, “the Fed will have to raise rates many times as many times as the market expects.”
The UBS analyst also claimed that some investors are increasingly realizing that Bitcoin is not the “better money” due to its high volatility. Furthermore, they said the cryptocurrency’s limited supply makes it inflexible as a currency. Analysts further stated that blockchain technology is difficult to scale due to its decentralized design.
Another major hurdle for cryptocurrencies is regulation, according to the UBS team. The analyst warned that widespread cryptocurrency speculation “will inevitably lead to closer oversight to protect consumers” and “protect financial stability.” They elaborated, “High-flying stablecoins and Defi [decentralized finance] The project seems almost certain to face even greater setbacks from the authorities in the coming months. “
In the U.S., the Biden administration is reportedly drafting a government-level strategy for crypto assets.Additionally, SEC Chairman Gary Gensler said last week that regulating cryptocurrency exchanges is a top priority for the U.S. Securities and Exchange Commission.
What do you think of UBS’s warning? Let us know in the comments section below.
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