Bitcoin’s slump could be the start of a ‘crypto winter’ that sees prices crash, UBS says

Crypto markets could be set for another „winter” of price crashes and could fail to recover for years, analysts at investment bank UBS have warned, as clouds gather to take the shine off digital assets, wrote Markets Insider.

The last crypto winter occurred at the end of 2017 and early 2018, when bitcoin tumbled from around $20,000 to stand below $4,000 more than a year later, causing many investors to lose interest in digital assets.

Interest rate hikes from the Federal Reserve in 2022 are set to dent the appeal of cryptocurrencies such as bitcoin in the eyes of many investors, the analysts, led by James Malcolm, said in a note to clients on Friday.

That’s because rising interest rates are putting paid to arguments that bitcoin is a good alternative currency or store of value, they said.

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, Malcolm and his colleagues said.

It’s also simply bad for the price, as central bank stimulus was a key factor lifting crypto tokens in 2020 and 2021.

Other factors are the technology has a lot of shortcomings, and regulation could stymie the development of the industry.