Global investment bank UBS believes Bitcoin is not stable enough to become mainstream money.
The bank believes the cryptocurrency has a lot of factors preventing a breakout, chief of which are technological limits and constant price changes.
In her notes to clients, as reported by CNBC, UBS global macro strategist Joni Teves said Bitcoin is still too “unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.” Teves also cited the crypto’s lack of price stability as one of the reasons why Bitcoin can’t be considered as real money.
“Owing to its lack of price stability, bitcoin falls short of criteria that need to be satisfied to be considered money,” she concluded.
Since the turn of the year, the price of cryptocurrencies has seen a massive decline with Bitcoin losing over 60 percent since getting to $20,000 late last year. Last week, the digital asset traded at $8,000, but it has seen further decline, trading close to $7,361, at press time, according to data from CCN.com.
For short-term investors, the volatility of bitcoin prices has been a cause for concern. Long-term buyers, on the other hand, have found it rewarding. So far, Bitcoin has outperformed other investment options. The cryptocurrency has grown by 216 percent annually, since 2013, compared to stock’s 16 percent and investment grade bonds’ 1.6 percent, according to UBS.
Teves also echoed some of the concerns of the Bank of International Settlement by highlighting scalability, size, and speed as issues that are yet to be fixed by the cryptocurrency.
“To process Visa’s c.$30 billion of daily transactions using the old core protocol, the block size would need to be 18.8MB instead of 1MB, or the price would have to be around $187,611,” she wrote.
She believes the changes made by developers to fix these issues have been “insufficient” so far and sees the digital asset as incapable of handling the “volume of transactions” that fiat money does.
Teves, in spite of the skepticism, believes bitcoin has a future and could, in fact, be considered a “legitimate asset class,” if there are better regulation with consumer safeguards.
The Swiss bank has been quite pessimistic about cryptocurrencies for a while. It once called it a “speculative bubble” last year, while praising the technology behind the currency—blockchain—which it praises by comparing it to “investing in the internet in the mid-nineties.”
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Last modified: June 11, 2020 1:47 PM UTC