Investment banking giant UBS is issuing a dire warning to investors who are looking to put their capital in the crypto markets.
The global wealth management team of UBS says in a note that the prices of crypto assets could fall drastically as a result of regulators clamping down on what it deems a “speculative market.”
“Regulators have demonstrated they can and will crack down on crypto. 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. 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.”
The note to clients cites China, which is cracking down on cryptocurrency mining, as an example of regulatory risk that crypto assets face.
UBS also mentions the US, where President of the Federal Reserve Bank of Boston Eric Rosengren last month said that Tether (USDT) was one of the “financial stability challenges” the central bank is scrutinizing.
The Swiss-based financial titan is looking at the United Kingdom as well. UBS mentions that the UK’s top regulatory body, the Financial Conduct Authority (FCA), warned late last month that a subsidiary of crypto exchange Binance, Binance Markets Limited, is not permitted to operate in the country.
In the note, UBS highlights the range of leverage that is typically available in the crypto markets.
“Crypto trading practices, such as extending 50X or 100X leverage, appear fundamentally at odds with mainstream finance regulation.”
The warning to investors comes after the trillion-dollar asset manager revealed in May that they were exploring ways to offer wealthy clients the ability to invest in crypto assets.
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