The big bank compares cryptocurrencies with Myspace or Netscape: These were also digital giants that went down to zero and disappeared. UBS warns new crypto investors looking to dive into the record-breaking rally of trading cryptos – they could still lose all their money.
Cryptocurrencies exchange such as Bybit (바이빗) is doing good now and enjoying popularity in digital currency exchange. But some financial analysts explain that crypto investors should not be so trusting as it may lose its luster in the long term, and eventually lead up to investors losing their money.
“According to an investor letter from UBS Global Wealth Management, it cannot be ruled out that the well-known digital currencies will one day disappear from the face of the earth – for example, due to regulatory intervention or competing crypto tokens issued by the central banks themselves.”
Although the major Swiss bank believes it is possible that Bitcoin prices will continue to rise in the short term, it warns that the sector’s existence is threatened in the long term.
From the point of view of financial analysts, there could be very few factors that can prevent the price of a cryptocurrency from falling to zero when a similar but better version is introduced to the market; or when regulatory changes stall sentiment, write the UBS authors, including Michael Bolliger, chief investment officer for emerging markets at UBS Wealth Management.
“Network services like My Space and Netscape are some of the services that have enjoyed fame and popularity but eventually went down because of new and better services of the same service.”
After last week’s bitcoin setback, the world’s biggest money managers are debating the volatile asset class with great interest. Famous investors like Paul Tudor Jones and Stan Druckenmiller have gotten in, while critics tend to smell casino conditions, scandals, and manipulation here.
In the short-term, crypto prices could rally again, fueled by momentum and growing interest from institutional investors.
In the long term, however, the market risks regulatory intervention, according to the UBS strategists. Among other things, they cite the decision by the British authorities to ban the sale of certain crypto derivatives to retail investors.
What can you buy with Bitcoin?
Like many financial firms, UBS is skeptical about the practical use of virtual tokens. However, the bank also refrains from speaking of a bubble when it comes to crypto prices. Because the problem lies in determining the real value of an investment without cash flow.
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However, other experts have set ambitious price targets for Bitcoin: The artificial currency will rise – for example, one argument – because more and more institutional investors want to diversify their portfolios and reduce their gold holdings in their favor. Strategists at the major US bank JP Morgan, therefore, believe that Bitcoin is capable of rising to $146,000 in the long term.
“Anyone who invests in cryptocurrencies,” advises UBS Wealth Management, “should limit their investment to an amount they can afford to lose.”