Bitcoin has fallen 12% over 24 hours while the chairman of UBS warned against investing in it and South Korea continued to crack down on cryptocurrencies by banning anonymous trading.
Talking at the Davos world economic forum, UBS Chairman Axel Weber, said that bitcoin and other cryptocurrencies were speculative, risky and “not an investment we would advise”.
“Retail clients, who don’t fully understand these products, should be protected from going into these products, because if there is a retail client affected in the future, the question will be again who was the bank that sold them these products and then banks will be blamed again for what has happened,” Weber told CNBC.
UBS’s comments echo those recently made by billionaire investor Warren Buffett, who said he would never invest in cryptocurrency despite bitcoin’s nearly 2,000% rise in 2017.
Consultancy Ernst & Young also warned Monday that so-called initial coin offerings (ICOs), which offer cryptocurrency tokens to raise funds, were at risk of cybercrime. Of the 372 ICOs analysed, raising a total of $3.7bn, roughly $400m had been stolen by hackers, who were taking up to $1.5m in ICO proceeds per month.
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Local investors remain bullish, however, with one South Korean trader identified only as Ahn telling Reuters that “everyone knew this was coming, as the government already said they will enforce the real-name system before.
“Rather, I can see this as a chance to go in, not out. I don’t see any reason to take my money out”
Beyond simple trading, the hype in cryptocurrency and blockchain technology has also caused concern, as companies seek to take advantage of investor buzz. Firms including camera-maker Kodak, fintech firm LongFin, power firm Digital Power, tobacco company Rich Cigars, tiny US drinks firm Long Island Iced Tea Corp and many other smaller companies have all seen their share price rocketthrough pivots towards cryptocurrencies or blockchain technology.
The SEC said it would begin scrutinising public companies that change their name or business model in a bid to capitalise upon the hype surrounding blockchain technology.
“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalise on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering,” said Chairman Jay Clayton on Monday.
The yo-yoing in value of bitcoin, ethereum and ripple, among other cryptocurrencies has led economists to warn that the cryptocurrency bubble could be bursting.
“When it will fully burst is anyone’s guess and prices could yet rise again, before they fall further ahead,” Capital Economics warned in a recent research note. “Triggers for the bubble to burst could be a further crackdown by regulators or a major hacking attempt.”