Crypto investors must limit their investment as Bitcoin and other cryptocurrencies could go the way of MySpace, says UBS Wealth
UBS Global Wealth Management says it's possible for the prices of Bitcoin and other cryptos to slide to zero.
Wed, 03 Feb 2021, 07:51 am UTC
The crypto market rally saw most cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) smash their previous records and reach new all-time highs this year. However, strategists from one of the world’s largest wealth management firms issued a warning to investors highlighting the possibility that they could still money.
Even with the current crypto market rally, UBS Global Wealth Management noted that well-known cryptocurrencies such as BItcoin are still facing regulatory threats and competition from CBDCs, according to Bloomberg. While the prices of digital currencies are likely to rise even further in the near term, the future of the entire industry remains uncertain with the presence of these existential risks.
One of the biggest risks facing investors is the possibility that they could lose their entire investment once their crypto holding’s price slides down to zero. “There is little in our view to stop a cryptocurrency’s price from going to zero when a better-designed version is launched or if regulatory changes stifle sentiment,” UBS Wealth said in a report released on Thursday. One of the report’s authors is the firm’s chief investment officer for global emerging markets, Michael Bolliger.
While there is rising interest in cryptocurrencies nowadays, UBS Wealth compared them to Netscape and Myspace, two previously popular services that eventually went out of style. “Netscape and Myspace are examples of network applications that enjoyed widespread popularity but eventually disappeared,” the report added.
It is a well-known fact that the prices of cryptocurrencies such as Bitcoin and Ether are highly volatile. BTC, which was only trading above $10,000 in September 2020, suddenly skyrocketed and even set a new record this year when it traded above $41,000 last month. The price has retreated once more and the crypto is now priced at $36,539 at the time of writing based on data from Coinmarketcap.
Facing such price uncertainty, UBS Wealth offered a suggestion to investors to limit the amount they place in cryptocurrencies. “Investors in cryptocurrencies must therefore limit the size of their investments to an amount they can afford to lose,” the report said.
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