Following last week’s crypto market crash, Switzerland’s largest bank – UBS warns that the market may not recover for years. The meltdown has wiped out billions of dollars from the cryptocurrency market. This coincides with the general decline in high-growth technology stocks as the US Federal Reserve plans to tinker with its monetary policies.
James Malcolm, the head analyst at UBS, noted that the Fed’s interest rate hikes are set to reduce the appeal of cryptocurrencies. USB’s analysts said investors may not hold bitcoin as protection against rising prices if central banks are able to handle inflation. The government stimulus is a key factor as it boosted crypto prices in 2020 and 2021.
Jamie Dimon, CEO at JP Morgan, highlighted that the US Federal Reserve is expected to raise interest rates several times this year. It may spike short-term interest rates more than four times. Goldman Sachs has similar views. The market will be left scrambling with the hikes.
As such, analysts believe investors are realizing that BTC is not better money. And the main reason is its high volatility. Moreover, cryptocurrency’s limited supply makes it inflexible as a currency. Analysts say blockchain technology is hard to scale because of its decentralized feature. The UBS team warned that widespread cryptocurrency speculation invites closer oversight to guard consumers and safeguard financial stability.
Stablecoins and decentralized financial projects due to legislation and government scrutiny are sure to suffer setbacks in the coming months. Furthermore, the US’s Biden administration is set to release an Executive Order on crypto by next month. The White House is scrutinizing crypto-like them before and this will have more drastic implications on the prices and overall value of the crypto market.