UBS warns of crypto winter in the middle of the expectation of FED-interest increases and regulation-markets and prices
UBS warns of crypto winter in the middle of the expectation of FED-interest increases and regulation-markets and prices
UBS, the largest bank in Switzerland, warned of a crypto winter in which prices crash and may not recover for years. The bank's analysts explained several main reasons that affect the prices of cryptocurrencies.
UBS expects crypto winter that could take years
The largest bank in Switzerland, UBS, has warned of a crypto winter in which the prices crash and may not recover for years. The analysts of the bank, led by James Malcolm, recently explains several reasons in a note to the customers why cryptocurrency could lose their attractiveness for investors this year.
Firstly, the UBS analysts stated that the interest rate increase of the Federal Reserve will reduce the attractiveness of cryptocurrencies such as Bitcoin for many investors who see the investment class as a good alternative value storage.The analysts added that investors may not keep Bitcoin as protection against rising prices if the central banks try to get inflation under control. They found that state incentives were a key factor for increasing the prices of cryptocurrencies in 2020 and 2021
It is expected that the Fed will raise interest rates several times this year. Jamie Dimon, CEO from JPMorgan, recently said that US Federal Reserve may have to raise the short-term interest rates more than four times this year. Goldman Sachs also assumes that the Fed will raise interest rates four times this year. Whartson Financial Professor Jeremy Siegel said At the beginning of this month: "The Fed will have to rise much more often than the market expected."
The UBS analysts also claim that some investors are increasingly recognizing that Bitcoin is not a "better money" due to its high volatility. In addition, they said that the limited range of cryptocurrency makes them inflexible as a currency. The analysts further stated that blockchain technology was difficult to scale due to its decentralized design.
Another major hurdle for cryptocurrencies is regulation, the UBS team described. The widespread cryptocurrency speculation "inevitably invites you to a closer surveillance to protect consumers" and "to protect financial stability", warned the analysts. They explained: "Highly flying stablecoins and defi [Decentralized Finance] projects seem to have a number of security from the authorities in the coming months."
In the USA, the bid administration reports reports on a draft for crypto-assets. In addition, the chairman of the US stock exchange supervisory authority SEC, Gary Gensler, said last week that the regulation of crypto exchanges was a top priority for seconds
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