Switzerland’s largest financial institution, UBS, has printed steerage for purchasers about investing in bitcoin. The financial institution solutions some essential questions, equivalent to whether or not one should purchase bitcoin and different cryptocurrencies and whether or not bitcoin can be utilized to diversify portfolios.
‘Ought to I purchase’ Bitcoin? UBS Solutions
UBS printed an in depth report about bitcoin final week. It solutions some questions that the financial institution is at present discussing with its purchasers, defined the report authors, together with the agency’s chief funding officer of worldwide rising markets, Michael Bolliger. UBS Group is at present Switzerland’s largest financial institution by complete belongings, adopted by Credit score Suisse Group.
The primary query UBS answered in its report entitled “The rise of bitcoin” was “Ought to I purchase?” The report explains that “Many purchasers are asking whether or not they need to put money into bitcoin and different cryptocurrencies,” including:
Our basic steerage is that this: Whereas we wouldn’t rule out additional value will increase, we’re considerably skeptical of any important real-world use instances, which makes it onerous to estimate a good worth for bitcoin and different cryptocurrencies.
“We’re additionally cognizant of the actual threat of 1 dropping one’s whole funding. Buyers in cryptocurrencies should subsequently restrict the scale of their investments to an quantity they will afford to lose. We additionally counsel excited about an exit technique,” the report authors elaborated.
Whereas admitting that “Certainly, costs [of cryptocurrencies] may proceed to climb within the close to time period,” the authors warned that “There’s little in our view to cease a cryptocurrency’s value from going to zero when a greater designed model is launched or if regulatory adjustments stifle sentiment.”
Can Bitcoin Be Used to Diversify Portfolios?
One other essential query UBS answered was whether or not bitcoin can be utilized to diversify portfolios. This topic “has develop into a key argument for traders,” the report emphasizes. Noting that “correlations spiked considerably in 2020 with the outbreak of the pandemic, however have normalized since,” UBS defined:
Whereas empirical proof is blended, bitcoin has had an general low correlation to a variety of different asset courses, together with bonds, shares, the Swiss franc, and gold.
The financial institution additionally highlighted that each institutional and retail traders are shopping for bitcoin. The explanations for getting embrace bitcoin being a pretty funding alternative, a hedge towards depreciating fiat forex, and FOMO.
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