UBS: Bitcoin is a speculative bubble and cannot become a real currency

There is a constant stream of people who are bearish on Bitcoin.

This time it is UBS, which believes that digital currencies, including Bitcoin, are a real "speculative bubble," not unlike the tulip speculation boom of the 17th century, the South Sea bubble, and the Internet bubble at the end of the last century and the beginning of this century.

According to data from CoinMarketCap, the total market size of all digital currencies has exceeded US$175 billion. Bitcoin has the highest market share among them and has also been the one with the strongest performance in recent times. Facing a global crackdown, the price of this asset rebounded strongly after a brief plunge and hit a new high recently.

UBS believes that the driving force behind Bitcoin's recent surge is not fundamentals.

Cryptocurrency prices have surged in recent months in what is seen as a speculative bubble.

"A perennial theme of bubbles is the ability of speculators to scream the dreaded 'this time it's different' cry," wrote UBS global chief economist Paul Donovan and analyst Sundeep Gantori.

At that point, the logical arguments against a bubble are ignored, as speculators say that the skeptics simply don’t understand: the world has changed. The problem with that thinking is that the world has never changed that much.

UBS believes:

If it’s like many past bubbles, the amazing rally in cryptocurrencies is based on the promise of future gains. Real-world gains take years to materialize. The relatively high turnover of cryptocurrencies, combined with very few real-world uses, means that many buyers are looking for speculative gains and will never use Bitcoin for real-world transactions.

Residual value, or fundamental value, is the most difficult to assess because governments are unlikely to support digital currencies and there is no economic backing behind them. Like every classic bubble asset, Bitcoin has skyrocketed 120 times in just two years without any economic fundamentals to back it up, and its price is almost certainly a bubble.

JPMorgan Chase CEO Jamie Dimon said last month that Bitcoin is a scam and only murderers, drug dealers and people living in North Korea, Ecuador and Venezuela should invest in it.

Dimon said, "If we have any traders trading Bitcoin, I will fire them immediately. There are two reasons: First, it is against our rules. Second, it is stupid. You can't do this business. Some people are going to create a currency out of thin air. It will not end well...Someone will be killed and the government will crack down on it severely."

However, a few days after his words fell, Bitcoin rebounded sharply after a brief decline and hit a new high. Dimon then closed his mouth: "I will not comment on Bitcoin anymore."

The annual meeting of the Institute of International Finance (IIF) held in Washington last Friday became a meeting to denounce Bitcoin. At the meeting, Dimon not only broke his vow the day before to "never talk about Bitcoin again", but also attacked Bitcoin's true value as crime and money laundering together with Fink, the head of the world's largest asset management company BlackRock. The two most powerful people in the US financial world agreed that Bitcoin will soon be "killed" by global governments.

Fink pointed out categorically that Bitcoin is a global money laundering index, and a higher price means that money laundering activities are booming.