UBS, the largest bank in Switzerland, has made suggestions a few investment strategies for investors who wish to get exposure to crypto assets. These are less risky than direct investment in ether, bitcoin, or other cryptocurrencies. According to UBS analysts, there are different ways available to investors for accessing this potential, which allow them to avoid the regulatory risk of holding bitcoin and other cryptocurrencies as well as high volatility. Last week, a research note was published by the UBS Global Wealth Management team on alternative investments, as opposed to directly holding cryptocurrencies.
Analysts of the bank, along with Mark Haefele, the Chief Investment Officer at UBS, elaborated that direct exposure to cryptocurrencies comes off as very speculative. According to them, the recent decline in bitcoin from the November high it achieved in the previous year has managed to undermine two of the most common defenses of this particular asset class. The UBS report stated that the first was the fact that cryptocurrencies can provide a good way to diversify from traditional financial assets like equities. Secondly, they added that viewing cryptocurrencies as ‘digital gold’, which could protect them from elevated inflation.
The UBS analysts maintained that exposure to crypto-assets is very speculative, but they added that it didn’t mean that the underlying technology of these digital assets did not have any potential for investors. They stated that there was an array of possible applications, which ranged from healthcare and financial services to luxury goods. They added that it would translate into a potential $1 trillion boost to the global GDP in this decade. The UBS analysts said that it wasn’t necessary for investors to have to deal with the regulatory risks or the high volatility for accessing the potential of crypto assets.
The first strategy that was suggested by the analysts included investing in companies that build the infrastructure necessary for the crypto ecosystem. They cited that they would benefit more from the use of distributed ledger technology (DLT) applications. The analysts said that more hardware would be required for DLT applications in order to validate the activities, such as application processors, application-specific integrated circuits (ASICs), and graphics processing units (GPUs). Some of the other enablers include data center-related companies as well as software makers that can be helpful in building overall infrastructure.
As a matter of fact, the analysts added that platform companies that would embrace these DLT applications would be an even bigger opportunity. As the technology is used increasingly in the next 5 to 10 years, there would be opportunities from the introduction of new categories and products, potentially lower prices as well as possible savings, along with an improvement in business efficiency. The UBS report concluded that these companies can be found in different industries, such as fintech, internet, software, consumer services, IT services, and insurance.
It said that they could use digital asset technology for providing a variety of services, including trade finance, payments, supply chain management, custodianship, consulting, and automation. UBS had issued a warning in January about a crypto winter due to expectations of regulation and Fed rate hikes.
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