Should I Buy Bitcoin? — Switzerlands Largest Bank UBS Provides Guidance on BTC Investing

Monday 25 January 2021, 1:51 PM AEST - 1 month ago

Should I Buy Bitcoin? — Switzerlands Largest Bank UBS Provides Guidance on BTC Investing

Switzerlands largest bank, UBS, has published guidance for clients about investing in bitcoin. The bank answers some important questions, such as whether one should buy bitcoin and other cryptocurrencies and whether bitcoin can be used to diversify portfolios.

Should I buy Bitcoin? UBS Answers

UBS published a detailed report about bitcoin last week. It answers some questions that the bank is currently discussing with its clients, explained the report authors, including the firms chief investment officer of global emerging markets, Michael Bolliger. UBS Group is currently Switzerlands largest bank by total assets, followed by Credit Suisse Group.

The first question UBS answered in its report entitled The rise of bitcoin was Should I buy? The report explains that Many clients are asking whether they should invest in bitcoin and other cryptocurrencies, adding:

Our general guidance is this: While we wouldnt rule out further price increases, were somewhat skeptical of any essential real-world use cases, which makes it hard to estimate a fair value for bitcoin and other cryptocurrencies.

We are also cognizant of the real risk of one losing ones entire investment. 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 report authors elaborated.

While admitting that Indeed, prices [of cryptocurrencies] could continue to climb in the near term, the authors warned that There is little in our view to stop a cryptocurrencys price from going to zero when a better designed version is launched or if regulatory changes stifle sentiment.

Can Bitcoin Be Used to Diversify Portfolios?

Another important question UBS answered was whether bitcoin can be used to diversify portfolios. This subject has become a key argument for investors, the report emphasizes. Noting that correlations spiked substantially in 2020 with the outbreak of the pandemic, but have normalized since, UBS explained:

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.

The bank also highlighted that bo ...

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