Is the crypto market about to enter an extended bearish phase? The Largest Swiss Bank, UBS, Has Warned Of Apocalyptic Crypto Winters And Prices Are Ready To Fall, Report news.bitcoin.com. The bank also issued an eerie warning that prices would not recover for many years. Bank analysts have highlighted several reasons for this conclusion.
High volatility makes cryptocurrencies unattractive to investors
The past few days have seen unprecedented carnage in the crypto sphere. Swiss banking giant, UBS, has warned of more halvings. Prices will not recover for many years to come. Additionally, a team of analysts led by James Malcolm circulated a note among his clients. The note warns that Cryptocurrencies will gradually lose interest among investors in 2022.
UBS warns of a potential “crypto winter” where prices fall meaningfully and do not recover for months or longer.
These people are just jealous… right? #to the moon #crypto $BTC $ ETH $ DOGE pic.twitter.com/WZe7cYtM9A
– Michael A. Gayed, CFA (@leadlagreport) January 22, 2022
The main reason cited by UBS analysts is that an interest rate hike by the Federal Reserve will reduce the appeal of cryptocurrencies. Many investors see crypto assets like bitcoin as a good alternative store of value.
Cryptocurrency Value Rises Thanks to Stimulus Test
The report also points out that the stimulus check conducted by the US government is a major factor driving crypto prices in 2020 and 2021. Central Bank rate hikes are inevitable if inflation is to growth in the U.S. economy is under control. If the Central Bank handles inflation, investors may not hold bitcoin as a hedge against rising prices.
The Fed is expected to raise rates several times this year. JPMorgan CEO Jamie Dimon feels that the Federal Reserve will have to raise interest rates more than four times this year. Goldman Sachs has a similar view, who says interest rates will see rates quadruple this year. Wharton finance professor Jeremy Siegel thinks that high inflation will lead to the Fed raising interest rates many times more than the market expected.
The truth finally came to light when investors Bitcoin (BTC), with high volatility, is not a good investment and is a means of preventing asset value erosion. In addition, they said the finite supply of Cryptocurrencies makes it an inflexible currency. The analysts added that blockchain technology is difficult to scale because of its decentralized design.
Another major factor hindering the spread of cryptocurrencies is the lack of regulation. High volatility also leads to stricter supervision to protect investors’ interests. Even stablecoins and DeFi are considered strong and flying [decentralized finance] projects will almost certainly face significant obstacles from the authorities in the coming months.