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UBS Takes Apart The Case For Investing In Cryptos

The woes of crypto currency investment go way beyond the problems caused by the Chinese government, according to a leading bank.

“We see a range of other reasons that investors should treat cryptos, such as bitcoin, as a speculative asset,” states a recent research note from Swiss banking company UBS.

In short, UBS manages to take apart the core of the investment thesis for investing in bitcoin and the other digital cryptocurrencies.

On China, UBS states the following:

  • “The latest news [China’s crypto crackdown] should challenge the view, popular among crypto enthusiasts, that cryptos and other decentralized finance applications can operate completely free from government influence.”

That’s just one thing. UBS sees other issues.

First it rightly notes that cryptos are not the same as money as they don’t fulfill the functions of money. I wrote about this a while back.

Second it says the benefits of diversification if cryptos are held in a larger portfolio is “limited. “Investors need to look at risk-adjusted returns to determine whether they are sufficiently compensated for the risk they are taking,” the report states.

Third, in line with Tesla’s
TSLA
Elon Musk, the bank says there are environmental issues with owning cryptos. Notably, the energy consumed in crypto world contributes to carbon use but doesn’t do much else good, the report states. UBS also points out that bitcoin operations use as much energy as Switzerland. Related problems include money laundering and tax evasion.

“We are not convinced that the growing cohort of sustainability oriented investors can reconcile these problems,” the report says. “We advise clients to practice caution with crypto speculation.”

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