Investment bank UBS thinks bitcoin is neither money nor a viable asset class â not yet at least.
The Switzerland-based companyâs assessment was featured in a research report on the worldâs largest crypto by market capitalization, which was circulated to clients and released on Thursday.
Published by UBS strategists, the report concludes that bitcoin âfalls short of criteria that need to be satisfied to be considered money.â It explains,
âFixed supply and unusual demand dynamics make the system susceptible to high price volatility, in turn making it difficult for bitcoin to step into the role of money or to be a viable new asset class.â
However, the authors donât rule out the possibility that bitcoin could one day become these things.
They argue that if bitcoin can achieve scalability and regulatory support, it could one day become âa viable payment mechanism and/or a legitimate asset class in which even the most conservative and traditional investors can participate.â
Likewise, they note their plans to âkeep on top of these developments,â as âmanyâ see promise in cryptocurrencyâs underlying blockchain technology.
According to the report, the research was the banking giantâs answer to its investors, who are becoming increasingly interested in the cryptocurrency space.
âWe have received many questions on the subject, which we hope to address in this educational piece,â the authors wrote in the publication.
The authorsâ findings were based on comparisons of bitcoin with âmacro variables and its performance against various asset classes.â They frequently draw parallels between bitcoin and online payments provider PayPal, and conclude that bitcoin âdiffusionâ could follow trends in online payments.
This is not the first time UBS has expressed a cautious view on cryptocurrency. In 2017, it declared cryptocurrencies a âspeculative bubbleâ in a report due to sharp rises in price at the time. Nonetheless, the bank has consistently been bullish on blockchain, and advised investors in the same report that âblockchain is likely to have a significant impactâ on a variety of industries.
UBS image via Shutterstock
