If you have no idea of what crypto winter is, the best can be explained by what happened in 2018-19. After the double top pattern in December 2017 and January 2018, we were in a consolidation phase for almost 2 years. This period can be termed as the crypto winter as there was no hope that Bitcoin would even survive or reach a new ATH again as it moved downward for 2 years continuosly. And now, the largest bank in Switzerland warns that we could soon see enter another crypto winter. They also gave their reasoning for the same.
Why should investors prepare for a crypto winter?
The warnings about a crypto winter from UBS come amidst various developments that are happening in the crypto space. One of the main reasons this rally kicked off was the feds printing money (a lot of it). And this, combined with the low-interest rates, pushed inflation to an almost 40-year high. But now, the authorities are planning to increase the interest rates to cut down credit in the market. This is expected to reduce inflation and hence affect the market. Crypto markets are not the only victims of these, as the S&P500 has also crashed recently.
Now the take from UBS is that if feds actually execute all this, then investors could move away from Bitcoin. The increase in interest rates is going to come several times in 2022 and even in 2023. Many banks have reported that it could be even be up to 4 times this year. The market is not prepared for this which might lead to a crash. Plus, the regulations that could soon be coming could also be a problem.
UBS calls out the problems with Bitcoin
We all know how incredibly volatile Bitcoin is and UBS says that this made investors realize that BTC is not “better money”. They also believe that the limited supply of Bitcoin is an issue and makes it inflexible to be used as a currency. While the points could be technically true, it is also necessary to understand that Bitcoin’s volatility is also the reason it has given such good returns over these years. At the same time, its limited quantity is not a problem but the actual reason for its value.
What are your thoughts as UBS says that we could soon enter a crypto winter? And are you prepared for the same if it happens? Let us know in the comments below. Also, if you found our content informative do like and share it with your friends.
Also Read: South Korea aims to become the 5th largest metaverse market by 2026
