UBS Warns Bitcoin Selloff May Be The Start Of A 'Crypto Winter', Says Fed Rate Hikes Will Lower Appeal Of Crypto

Analysts at investment banking giant UBS Group AG UBS are warning that Bitcoin’s BTC/USD recent price slump could suggest the start of a “crypto winter.”

What Happened: In a note to investors seen by Business Insider, UBS analysts outlined some key factors that suggest crypto markets might be headed into bearish territory.

Crypto winter is a term market participants use to define a sustained period of price crashes in the crypto market – according to UBS, prices may fail to recover for years to come.

Lead UBS analyst James Malcolm argued that interest rate hikes from the Federal Reserve in 2022 will likely lower the appeal of Bitcoin and other cryptocurrencies in the eyes of investors.

“If central banks are moving to get a handle on inflation, then that damages the argument that investors should hold bitcoin as protection against price rises,” stated the UBS analysts.

Malcolm and his colleagues also believe that there is a “dawning realization” among investors that Bitcoin is not actually “better money” given its volatility and limited supply, which makes it inflexible.

Also Read: Is Bitcoin Forming A Bottom Or Will It Rally? Here's What Analysts Are Saying

The analysts also believe that the decentralized nature of blockchain technology may actually be detrimental to the success of cryptocurrency and a period of sustained positive price action.

Since blockchains require all members of the network to be able to oversee and verify transactions, UBS believes scalability will be a challenge.

“Regulation is a third major problem,” they said. "High-flying stablecoins and [decentralized finance] projects seem almost sure to face bigger setbacks from authorities in the coming months."

Price Action: As of Tuesday morning, Bitcoin was trading at $41,660.77, down 2.32% in the last 24 hours.