Cryptocurrencies, and Bitcoin in particular, are subject to “massive” corrections, warns Axel Weber, chairman of the international Swiss bank and financial services corporation UBS Group.
According to Weber, continued cryptocurrency market volatility and a startling and steady devaluation since late 2017 suggest speculator overvaluation of Bitcoin.
Priced at $20,000 in December 2017, Bitcoin is now valued at about $11,000. Its bullish upward trend has coolly and dramatically plateaued, for the moment.
Weber speculated that, as international finance regulations become stricter, investors and speculators will sell more and more of their cryptocurrencies, causing serious corrections in the near future.
“This is something where the price is really unclear,” Weber said. “We fear that in the future if these investments implode and the market corrects, then investors will be looking at ‘who sold us this?’”
Many international financial banks, companies and institutions are hesitant to invest their client capital in Bitcoin and similar cryptocurrencies due to increasing international regulations guarding against money laundering, fraud, tax evasion and cryptocurrency investment bubble fears.
UBS Group is hardly the only financial institution concerned about international finance regulation compliance and investor protection.
The European Commission, the legislative proposal body of the European Union, may augment existing regulations in regard to cryptocurrencies to protect against potential crypto bubbles. Tidjane Thiam, CEO of Credit Suisse, recently called Bitcoin, “the very definition of a bubble.”
Andrey Kostin, who is the chairman for the management board for VTB Bank in Russia, labeled Bitcoin and similar cryptocurrencies as “fake.”
Upended markets
Kostin stressed that international governments and financial institutions should not deal in or accept an anonymously created digital currency that isn’t minted or regulated by any government or central bank-like institutions.
What’s more, cryptocurrency ownership inequality can upend international financial markets at any given moment.
Cryptocurrency ownership research conducted in late 2017 has confirmed that only about 4 percent of all Bitcoin owners and blockchain miners control about 95% of all existing Bitcoins.
At any moment, one of the “4-percenter” Bitcoin owners could unload their cryptocurrency and significantly affect Bitcoin value, creating volatility and potentially igniting a market correction.
A potential near-future correction may be worsened by Europe’s ever-burgeoning housing market and an incipient real estate bubble.
Weber pointed out that as more homeowners experience foreclosures and evictions across Europe, more former tenants will default on mortgage loans which in turn could cause greater financial ripple effects.
