Analysts at UBS Bank questioned the status of …
Analysts at UBS Bank questioned Bitcoin’s status as a defensive asset
Bankers are again questioning the prospects of the first cryptocurrency. This time, the Swiss division of UBS tried to challenge the status of bitcoin as a defensive asset, writes Decrypt.
A defensive asset is understood as a financial instrument that has the potential to maintain or increase value during an economic downturn. Such assets do not depend on the broader economy and demonstrate resilience against the background of market crashes, allowing investors to earn or at least not lose their assets. Although demand for defensive assets is growing, UBS does not see Bitcoin as one of them..
“Given their high volatility and the scale of previous falls, cryptocurrencies can be attractive to speculative investors, but they are not an acceptable alternative to defensive assets and do not necessarily contribute to portfolio diversification,” write banking analysts.
They cite four reasons why Bitcoin is not considered a defensive asset. First, the cryptocurrency does not pass the standard risk test because its fluctuations are too large for most investors. “Trading-oriented investors may find these fluctuations attractive, but our analysis shows that choosing the wrong timing can lead to the destruction of capital,” writes UBS.
Also important is the survivor’s error factor. Investors often pay attention to successful cryptocurrencies and forget about the failures. As a result, their views may be distorted. “Distinguishing between winners and losers requires a good understanding of the supply and demand drivers of any cryptocurrency,” the report says..
As a third reason, the authors cite the absence of dividends or coupon payments. This increases the importance of choosing the right time to invest. “Risky assets usually experience large declines, and without a constant cash flow, this could rather lead to a complete loss of fortune,” they add..
Finally, analysts are questioning the diversification benefits of Bitcoin. According to their observations, the correlation of Bitcoin with other asset classes has increased recently, due to which the profitability of its presence in the traditional portfolio has decreased..
The CEO of MicroStrategy, which recently invested $ 425 million in bitcoin, is of a different opinion..
Bitcoin Dips Below $ 9,000, But Bloomberg Analyst Predicts Fixation Above $ 10,000 Leading Commodity Analyst Bloomberg…
Analysts at JPMorgan say the worst for risky asset markets may be behind Analysts at JPMorgan Chase Co. claim that most…
Grayscale analysts compared the current situation in the bitcoin market with the beginning of 2016 Digital asset management company Grayscale Investments…
Strategic partner AERGO will help the Bank of Korea test the blockchain Bank of Korea has started to study the infrastructure of micropayments on the blockchain with…
Bank of Canada linked investment in cryptocurrencies with low levels of financial literacy The Bank of Canada found that the majority of residents of the country…