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Analysts at investment banking giant Union Bank of Switzerland (UBS) are reportedly warning that a confluence of factors could see crypto prices remaining depressed for years.
According to Business Insider, the UBS analysts said in a note to clients that plans by the Federal Reserve Bank to hike interest rates will make Bitcoin (BTC) less attractive to investors who bought BTC as a store of value.
According to the report, raising interest rates to combat inflation will diminish Bitcoin’s appeal as an asset to hold as a buffer against diminishing purchasing power.
The analysts also say that the availability of central bank stimulus in 2020 and 2021 was a key catalyst in pushing the crypto markets to greater heights but the macroeconomic landscape would change once interest rates start going up.
Crypto investors have also realized that Bitcoin is not “better money” due to its high volatility and inflexibility occasioned by its limited supply, according to the report.
The UBS analysts add that the shortcomings of blockchain technology will diminish the appeal of cryptocurrencies to investors. According to the client note, the decentralized nature of blockchains requires all nodes or network members to oversee and verify transactions at the expense of scalability.
The UBS analysts also say that regulations pose a risk as they could curtail the crypto industry. According to the report, “rampant speculation on crypto networks” will invite regulations geared toward guarding consumers and protecting financial stability.
The crypto sectors likely to attract regulatory attention include stablecoins and decentralized finance (DeFi) projects, according to the report.
“High-flying stablecoins and [DeFi] projects seem almost sure to face bigger setbacks from authorities in the coming months.”
Bitcoin is trading at 33,304 at time of writing, down 23% over the past seven days.
UBS, which was founded 160 years ago, operates in over 50 countries and holds about $2.6 trillion in assets under management.