Forget crypto — this is the 'next big thing' investors should focus on, according to UBS

Published Tue, Jun 29 20217:30 PM EDT

UBS isn't a fan of bitcoin and other cryptocurrencies, describing them as a "speculative market" and urging investors to consider an alternative instead. In a note released Monday, the Swiss investment bank said that regulation poses a significant risk to digital assets. Earlier this month, China spooked bitcoin investors with a crackdown on cryptocurrency mining and trading . More recently, the U.K.'s markets watchdog ordered Binance, a top crypto exchange, to cease regulated activities in the country. "We've long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets," UBS' global wealth management team said in the note. "We think investors should avoid crypto speculation, and consider risk-adjusted returns before buying alternative assets." Investors looking to make investments in digital finance should look to the fast-growing financial technology sector, UBS said, calling fintech "one of the emerging sectors we think might yield 'The Next Big Thing.'" "The prospect of large gains may tempt investors, but we think speculation in cryptos is a gamble, not an investment," the bank said. "Investors looking for exposure to digital payment assets can consider fintech instead, which we expect to benefit from structural growth." While the bank didn't name any stocks, fintech companies like Square and PayPal have experienced sizable gains over the past year, climbing 140% and 74% respectively. Payment networks Visa and Mastercard , meanwhile, are up 23% and 26% respectively. That's thanks in no small part to a rise in digital payment volumes during the coronavirus pandemic. What's weighing on bitcoin? Bitcoin is currently down around 45% from its record high of nearly $65,000 in April. It was last trading at around $35,835, up 4% in the last 24 hours, as of Tuesday. The world's largest digital coin had benefited from an influx of institutional investors ditching gold in favor of bitcoin as an inflation hedge. However, that trend appears to have reversed more recently. UBS said a number of other factors are weighing on bitcoin. It alluded to news that Boston Federal Reserve President Eric Rosengren called tether — a controversial stablecoin tied to the U.S. dollar — a financial stability challenge. The bank also highlighted the case of Africrypt, a South African crypto exchange whose founders have reportedly disappeared , taking $3.6 billion in client funds with them. "While the pandemic may ensure financial repression continues, we think crypto speculation poses its own risks to your wealth," UBS said.

Representations of the Bitcoin cryptocurrency are seen in this photo illustration.

Egdar Su | Reuters

UBS isn't a fan of bitcoin and other cryptocurrencies, describing them as a "speculative market" and urging investors to consider an alternative instead.