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A chief economist at UBS, Switzerland’s largest bank, says cryptocurrency has a fundamental flaw. Bitcoin’s solid supply could cause the collapse of its value and purchasing power, making it unattractive to use as a currency, he claims.

A chief economist at UBS says Bitcoin’s steady supply is a “fundamental mistake.”

Paul Donovan, chief economist at UBS Global Wealth Management, explained last week why people don’t want to use bitcoin as a currency. UBS is Switzerland’s largest bank.

“The debate about bitcoin and other cryptocurrencies is often very passionate. Crypto supporters say economists are just dinosaurs, and economists say crypto supporters are just selling a bubble. He also pointed out that bitcoin and other cryptocurrencies have been volatile in price.

“Looking at the issue objectively, I think an important question is whether bitcoin and other cryptocurrencies can be currencies,” the UBS chief economist continued, emphasizing, “And I don’t think they can.”

He explained: “One of the main reasons for this is that a currency should be a stable store of value. With the right currency, you have a real assurance that the basket of goods you can buy today will be the same as the basket of goods you can buy tomorrow. “

However, he claimed: “With bitcoin and other crypto you don’t have that certainty.” The chief economist at UBS explained:

It’s all because of a rather fundamental crypto flaw. To achieve stable purchasing power, a store of value, the balance between supply and demand, must be maintained.

“So if demand for the right currency falls, the central bank can reduce supply, maintain balance and thus maintain purchasing power,” said UBS’s chief economist. However, he did not distinguish between fixed-supply cryptocurrencies, such as bitcoin, and other non-fixed-supply coins, including stablecoins.

Donovan continued:

But if the demand for cryptocurrencies falls, and it clearly does, the supply cannot fall to maintain the balance. So value and purchasing power immediately collapse.

“It can collapse for a short time or it can collapse for a long time. But people are unlikely to want to use anything like currency if they have absolutely no certainty about what to buy with it tomorrow, ”he concluded.

Many financial strategists, on the other hand, have said bitcoin’s volatility falls as adoption increases. Fidelity pointed this out recently BTCVolatility is about 50% down from a few years ago. In July, BTC‘s volatility hit a three years low. Billionaire investor Bill Miller said bitcoin will be less risky the higher the price goes.

UBS has recently published guidance on bitcoin investing. “While we would not rule out further price increases,” the bank warned, “We are also aware of the real risk of someone losing their entire investment. Investors in cryptocurrencies should therefore limit the size of their investments to an amount they can afford. to lose. “

What do you think of the UBS economist’s opinion on bitcoin? Let us know in the comments below.

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