The bitcoin bears gained a new team member this week with the addition of UBS Group AG Chairman Alex Weber. In an interview with Bloomberg at the World Economic Forum in Davos, Switzerland, Weber indicated that the Swiss bank does not plan to trade the digital currency or offer it to its retail clients. He warned that heightened regulation facing the world's largest cryptocurrency (by market capitalization) could result in a "massive" drop in its value. (See also: Bitcoin Could Lose 90% of Its Value: Street Vet.)
"This is something where the price is really unclear," said Weber. "We fear that in the future if these investments implode and the market corrects, then investors will be looking at 'who sold us this?'" The UBS chairman noted that bitcoin's price swings are due to the highly inelastic supply of bitcoin. With a sticky supply of the digital money, every tick up in demand results in a subsequent increase in price.
As for government regulation, South Korea is currently debating an outright ban on bitcoin exchanges due to concerns regarding money laundering and tax evasion. China, another major bitcoin market, has taken various steps to control the technology. At the same time, financial institutions around the world are citing compliance concerns as the main factors causing them to hesitate in investing client assets into the volatile cryptocurrencies.
Doubts on Digital Currency
Earlier this month, The European Commission warned that it may up its regulation of digital coins due to signs of a pricing bubble.
The UBS executive wasn't the only big name in the finance industry to speak about bitcoin at the World Economic Forum. Appearing in Davos on Wednesday, Credit Suisse Group AG's Chief Executive Officer Tidjane Thiam stated that "digital currencies have a future" and that he is a "fan of the blockchain," the underlying technology behind digital currencies. The comments may seem to backtrack on his statement in November when he called bitcoin the "very definition of a bubble."
Russia's VTB Bank PJSC management board Chairman Andrey Kostin deemed bitcoin "fake" currency, doubting that governments would accept a growing market of money not printed by a country. (See also: Bitcoin Can Make Smart People Broke, Too.)
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