Regulatory crack downs might pop bubbly crypto markets and cause bitcoin to be unsuitable for professional investors, according to Swiss financial giant UBS in their warning to their clients.
In a message sent out last week, UBS’ global wealth team stated that China’s new crackdown had harmed crypto prices. It also revealed that there were signs that harder rules might be in the works for Western markets like the UK and US.
“Regulators have shown they can and will get tougher on crypto,” the note said. “So we say that investors should stay clear, and form their portfolio around not so risky assets.”
It continued: “We have long warned about changing investor sentiment or government crackdowns popping bubble-like cryptocurrency markets.”
UBS’ warning to their clients also said that a number of recent regulatory news were a worry for cryptocurrencies.
China brought back its restrictions on the computing process that creates cryptocurrency, known as “mining,” in June, with authorities inside the Sichuan province shutting down many sites.
In the United States, the president of the Boston Federal Reserve, Eric Rosengren, said Tether was one of the “financial stability problems” it is looking at. And the UK’s Financial Conduct Authority blocked crypto exchange Binance from their territory.
UBS’s message added: “Crypto trading practices, like extending 50X or up to 100X leverage, seem fundamentally against mainstream financial regulation.”
The Swiss bank’s worries about cryptocurrencies is the same as many other banks and lenders. Goldman Sachs analysts even said that bitcoin is “not a suitable investment” and mentioned worries about its volatility.
However, Wall Street is now divided on the use of cryptocurrencies – and so are banks. Goldman Sachs relaunched its crypto trading service this year to profit from the crypto boom, regardless of its reservations.
UBS said in their note: “While we cannot rule out future price increases in cryptos, we see it as a speculative sector that poses great risks to serious investors.”
Author: Blake Ambrose