The largest Swiss bank, UBS, has published guidelines for clients to invest in Bitcoin. The bank answers some important questions, such as: B. whether one should buy Bitcoin and other cryptocurrencies and whether Bitcoin can be used to diversify portfolios.
Should I Buy Bitcoin? UBS answers
UBS released a detailed report on Bitcoin last week. It answers some of the questions the bank is currently discussing with its clients, stated authors of the report, including the company’s chief investment officer for emerging global markets, Michael Bolliger. The UBS Group is currently the largest bank in Switzerland in terms of total assets, followed by the Credit Suisse Group.
The first question UBS answered in its report entitled “The Rise of Bitcoin” was “Should I buy?” The report says, “Many customers are asking if they should invest in Bitcoin and other cryptocurrencies.”
Our general guideline is: Although we would not rule out further price increases, we are somewhat skeptical of key use cases in practice, which makes it difficult to estimate a fair value for Bitcoin and other cryptocurrencies.
“We are also aware of the real risk of someone losing their entire investment. Investors in cryptocurrencies must therefore limit the size of their investments to an amount that they can afford to lose. We also recommend considering an exit strategy, ”explained the report’s authors.
While we admit that “indeed the prices [of cryptocurrencies] could continue to rise in the near future, ”the authors warned,“ in our view, there is little that can prevent the price of a cryptocurrency from falling to zero when a better crafted version is introduced or when regulatory changes dampen sentiment. “
Can Bitcoin be used to diversify portfolios?
Another important question that UBS answered was whether Bitcoin can be used to diversify portfolios. This topic “has become a key argument for investors,” the report emphasizes. UBS stated: “Correlations increased significantly in 2020 with the outbreak of the pandemic, but have since returned to normal.
While the empirical data is mixed, Bitcoin exhibits low overall correlation with a variety of other asset classes, including bonds, stocks, the Swiss franc, and gold.
The bank also stressed that both institutional and retail investors are buying bitcoin. Reasons to buy include Bitcoin as an attractive investment opportunity, a hedge against the devaluation of the fiat currency and FOMO.
What do you think of UBS’s advice on Bitcoin investing? Let us know in the comments below.
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