UBS: Bitcoin Is Too 'Unstable and Limited' to Function as Money

Investment bank UBS thinks bitcoin is neither money nor a viable asset class - not yet at least.

Published by UBS strategists, the report concludes that bitcoin "Falls short of criteria that need to be satisfied to be considered money." It explains,.

"Fixed supply and unusual demand dynamics make the system susceptible to high price volatility, in turn making it difficult for bitcoin to step into the role of money or to be a viable new asset class."

The authors don't rule out the possibility that bitcoin could one day become these things.

They argue that if bitcoin can achieve scalability and regulatory support, it could one day become "a viable payment mechanism and/or a legitimate asset class in which even the most conservative and traditional investors can participate."

According to the report, the research was the banking giant's answer to its investors, who are becoming increasingly interested in the cryptocurrency space.

The authors' findings were based on comparisons of bitcoin with "Macro variables and its performance against various asset classes." They frequently draw parallels between bitcoin and online payments provider PayPal, and conclude that bitcoin "Diffusion" could follow trends in online payments.

This is not the first time UBS has expressed a cautious view on cryptocurrency.

The bank has consistently been bullish on blockchain, and advised investors in the same report that "Blockchain is likely to have a significant impact" on a variety of industries.

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