The prospect of large gains from cryptocurrencies may tempt investors, but we think speculation in cryptos is a gamble, not an investment. (ddp)

After hitting a record high above USD 64,000 in mid-April, Bitcoin has slipped by about 45% to around USD 34,000. Sentiment has gyrated between excitement and concern amid Chinese and Western regulatory action, funding pledges, and the El Salvador legal tender announcement. While we can't rule out future price gains in cryptos, we see this as a speculative market that poses significant risks to professional investors. Those seeking exposure to digital payment assets can consider fintech instead.


Crypto proponents are holding on after a major sell-off.

  • Bitcoin prices crashed to as low as USD 28,800 on 22 June, some 55% below their mid-April peak.
  • Since then, buyers have returned, encouraged by prior boom-bust cycle experiences and supportive news on institutional adoption and large fund purchases.
  • Despite the sell-off, top cryptos Bitcoin and Ethereum are still up 19% and 168% YTD, respectively, as of 28 June.

But regulators have demonstrated they can and will crack down on crypto.

  • China's latest crackdown—extending to miners, banks, e-payment networks, and social media—hurt crypto prices and operators.
  • A Federal Reserve official's warnings on top "stablecoin" Tether and the UK FCA's direct rebuke of Binance suggest an escalation in Western regulatory messaging.
  • Crypto trading practices, such as extending 50X or 100X leverage, appear fundamentally at odds with mainstream finance regulation.

So we suggest investors stay clear, and build their portfolio around less risky assets.

  • We've long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets.
  • We think investors should avoid crypto speculation, and consider risk-adjusted returns before buying alternative assets.
  • Investors looking for exposure to digital payment assets can consider fintech—one of the emerging sectors we think might yield The Next Big Thing.

Investment view

While the pandemic may ensure financial repression continues, we think crypto speculation poses its own risks to your wealth. The prospect of large gains may tempt investors, but we think speculation in cryptos is a gamble, not an investment. Investors looking for exposure to digital payment assets can consider fintech instead, which we expect to benefit from structural growth.


Read the original report UBS House View Briefcase: After sell-off, is now the time to buy crypto? 28 June 2021.


This content is a product of the UBS Chief Investment Office.