UBS publishes Bitcoin (BTC) investing guidance

UBS has published guidance on Bitcoin investing for clients planning to go into cryptocurrencies. In the detailed report, Switzerland’s largest bank explained its position on some of the most commonly asked questions by customers on investing in crypto.

Last week, UBS published a report titled “The rise of bitcoin” to guide clients who might want to invest in Bitcoin or other cryptocurrencies, according to Bitcoin.com. The first question the bank tackled is “Should I buy?” explaining that they have been receiving queries from clients on “whether they should invest in bitcoin and other cryptocurrencies.”

The bank explained that one of the difficulties for investing in crypto is that it’s hard to come up with a fair value for BTC and other cryptos. “Our general guidance is this: While we wouldn’t rule out further price increases, we’re somewhat skeptical of any essential real-world use cases, which makes it hard to estimate a fair value for bitcoin and other cryptocurrencies,” UBS wrote.

Investing in cryptocurrency also exposes customers to the possibility of losing their funds. UBS said that one way to manage this risk, should they decide to invest in Bitcoin or another crypto, is to limit their exposure.

“We are also cognizant of the real risk of one losing one’s entire investment,” the authors, which include chief investment officer of global emerging markets Michael Bolliger, explained. “Investors in cryptocurrencies must therefore limit the size of their investments to an amount they can afford to lose. We also suggest thinking about an exit strategy.”

The bank’s guidance also touched on the issue of whether its’ a good thing to use Bitcoin to diversify portfolios. The bank noted that “correlations spiked substantially in 2020 with the outbreak of the pandemic, but have normalized since.”

“While empirical evidence is mixed, bitcoin has had an overall low correlation to a wide range of other asset classes, including bonds, stocks, the Swiss franc, and gold,” UBS said.

UBS is Switzerland’s largest bank by total assets. The entity was formed in 1998 after the merger between Swiss Bank Corporation, established in 1872, and Union Bank of Switzerland, founded in 1862.