UBS Warns Of Crypto Winter Amid Fed Hike Of Interest Rate And Crypto Regulation
UBS, Switzerland's largest bank, has warned of a crypto winter where prices will collapse and take many years to recover. One of the reasons, according to UBS analysts, is the increase in the Fed's interest rate. This should reduce the attractiveness of cryptocurrencies like bitcoin for many investors who see this asset class as a good alternative store of value.
The next reason is the attempt of the Central Bank to cope with inflation, and then investors may not hold bitcoin as a protection against price increases. Analysts noted that the Fed’s stimulus has been a key driver of price growth in the crypto market in 2020 and 2021. UBS analysts also said that some investors are becoming more aware that bitcoin is not the "better money" due to its high volatility. In addition, the limited supply of the cryptocurrency makes it inflexible as a currency.
According to the UBS team, another major hurdle for cryptocurrency is regulation. Analysts warn that widespread cryptocurrency speculation “inevitably invites closer oversight to guard consumers” and “protect financial stability.” Analysts are confident that stablecoins and DeFi projects are likely to face more serious challenges from the authorities in the coming months.
Image: Frank RG
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