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UBS Warns of Crypto Winter Amid Expectation of Fed Rate Hikes and Regulation

UBS, Switzerland’s largest bank, has put someone on noticed about a crypto winter where prices crash and may not recover for years. The bank’s analysts explained several dominating reasons affecting the prices of cryptocurrencies.

UBS Expects Crypto Winter That Could Last Years

Switzerland’s burliest bank, UBS, has warned of a crypto winter where prices crash and may not recover for years. The bank’s analysts, led by James Malcolm, recently elucidated in a note to clients several reasons why cryptocurrency may lose its attractiveness to investors this year.

Firstly, the UBS analysts full that the Federal Reserve’s interest rate hikes are set to reduce the appeal of cryptocurrencies, such as bitcoin, for many investors who see the asset rate as a good alternative store of value.

The analysts added that if central banks move to get a handle on inflation, investors may not be curb bitcoin as protection against rising prices. They noted that government stimulus was a key factor boosting the cost outs of cryptocurrencies in 2020 and 2021.

The Fed is expected to raise interest rates several times this year. JPMorgan CEO Jamie Dimon recently said that the Federal Reinforcements might have to raise short-term interest rates more than four times this year. Goldman Sachs similarly imagines the Fed to raise interest rates four times this year. Wharton’s finance professor Jeremy Siegel give the word delivered earlier this month, “The Fed is going to have to hike many more times than what the market conjectures.”

The UBS analysts also claimed that some investors are increasingly realizing that bitcoin is not “better money” because of its pongy chief volatility. In addition, they said the cryptocurrency’s limited supply makes it inflexible as a currency. The analysts further circumstanced that blockchain technology is hard to scale because of its decentralized design.

Another major hurdle for cryptocurrency is decree, the UBS team described. Widespread cryptocurrency speculation “inevitably invites closer oversight to guard consumers” and “protect pecuniary stability,” the analysts warned. They elaborated, “high-flying stablecoins and defi [decentralized finance] projects seem on the verge of sure to face bigger setbacks from authorities in the coming months.”

In the U.S., the Biden administration is reportedly drafting a government-wide procedure for crypto assets. Furthermore, the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, said last week that managing crypto exchanges is a top priority for the SEC.

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What do you think about the warning by UBS? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin ground Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network capacities and the intersection between economics and cryptography.

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