The chief economist of UBS, Switzerland’s largest bank, said that cryptocurrencies have fundamental flaws. He that the fixed supply of Bitcoin may cause its value and spending power to collapse, making it unattractive as a currency.

UBS chief economist calls the fixed supply of Bitcoin a “fundamental flaw”

Paul Donovan, chief economist of UBS Global Wealth Management, explained last week why people don’t want to use Bitcoin as a currency. UBS is the largest bank in Switzerland.

“The debate about Bitcoin and other cryptocurrencies is often very fierce. Cryptocurrency supporters say that economists are just dinosaurs, and economists say that cryptocurrency supporters are just selling bubbles.” He also pointed out that Bitcoin and other cryptocurrencies The price of currency fluctuates all the time.

The chief economist of UBS continued to emphasize: “If we look at this issue objectively, I think an important question is whether Bitcoin and other cryptocurrencies can be currencies. Moreover, I think they are impossible.”

He explained: “One of the main reasons for this is that currency must be a stable store of value. With the right currency, you can truly be sure that the basket of commodities you can buy today is the same as the basket of commodities you can buy tomorrow.”

However, he asserted: “With Bitcoin and other cryptocurrencies, you are not sure.” UBS chief economist explained:

It all boils down to a basic flaw in encryption technology. In order to achieve stable consumption capacity, it is necessary to maintain a store of value and balance supply and demand.

The chief economist of UBS said: “Therefore, if the demand for an appropriate currency falls, the central bank can reduce the supply and maintain a balance, thereby maintaining consumption power.” However, he did not distinguish between cryptocurrencies with a fixed supply (such as Bitcoin) and other coins without a fixed supply (including stablecoins).

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Donovan continued:

However, if the demand for cryptocurrencies falls, and it goes without saying, then the supply will not fall to maintain balance. Therefore, value and consumption power collapse immediately.

“It may collapse in a short period of time, or it may collapse for a long time. However, if people are not absolutely sure of what they can buy with this currency tomorrow, they are unlikely to want to use something as currency.

On the other hand, many financial strategists stated that as adoption rates increase, Bitcoin’s decreases. Fidelity recently pointed out that Bitcoin’s volatility has dropped by about 50% from a few years ago. In July, BTC’s volatility reached a three-year low. Billionaire investor Bill Miller (Bill Miller) said that as prices rise, Bitcoin’s risk decreases.

UBS recently released a guide on Bitcoin investment. The bank warned: “Although we do not rule out further price increases, we are also aware of the real risk of one person losing all of his investment. Therefore, investors in cryptocurrencies must limit their investment scale to the amount of losses they can bear. “

What do you think of UBS economists’ views on Bitcoin? Let us know in the comments section below.

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