Switzerland’s largest financial institution, UBS, has revealed steering for shoppers about investing in bitcoin. The financial institution solutions some essential questions, corresponding 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 revealed an in depth report about bitcoin final week. It solutions some questions that the financial institution is at present discussing with its shoppers, defined the report authors, together with the agency’s chief funding officer of world rising markets, Michael Bolliger. UBS Group is at present Switzerland’s largest financial institution by complete property, 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 consumers are asking whether or not they need to put money into bitcoin and different cryptocurrencies,” including:
Our normal steering is that this: Whereas we wouldn’t rule out additional worth will increase, we’re considerably skeptical of any important real-world use instances, which makes it arduous to estimate a good worth for bitcoin and different cryptocurrencies.
“We’re additionally cognizant of the actual danger of 1 shedding one’s whole funding. Buyers in cryptocurrencies should subsequently restrict the dimensions of their investments to an quantity they’ll afford to lose. We additionally counsel fascinated with 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 worth 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 buyers,” 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 combined, bitcoin has had an total 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 buyers are shopping for bitcoin. The explanations for getting embrace bitcoin being a beautiful funding alternative, a hedge in opposition to depreciating fiat forex, and FOMO.
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