USB, Switzerland’s largest bank, has warned of a crypto winter in which values would drop and may not recoup for years. The bank’s analysts, led by James Malcolm, recently highlighted various reasons why crypto may lose its appeal to investors this year.
UBS analysts explained that a hike in the Federal Reserve’s interest rate would limit the attraction to many investors.
Analysts said that if central banks seek to control inflation, investors may abandon bitcoin as a hedge against rising costs. They emphasised that government support was a crucial component in rising cryptocurrency prices in 2020 and 2021.
According to JPMorgan CEO Jamie Dimon, Goldman Sachs and Jeremy Siegel, a finance professor at Wharton, all are of the view that the Federal Reserve is likely to hike short term rate of interest more than four times this year.
According to UBS experts, some investors are discovering that bitcoin is not “better money” due to its volatility. The experts also said that blockchain technology is hard to handle due to its decentralised architecture.
Another significant barrier for bitcoin, according to the UBS team, is legislation. They went on to say that “high-flying stablecoins and defi [decentralised finance] initiatives are practically certain to encounter significant setbacks from regulators in the coming months.”
The Biden administration in the United States is apparently developing a government-wide policy for crypto assets. Gary Gensler, the head of SEC, stated last week that regulating cryptocurrency exchanges is a major priority for the SEC.
