Dubai Bank Issues Crypto Investment Warning – Why?

Why Dubai Bank Warned Against Crypto Investment

This period seems to be a season when advice, warnings, and regulations against cryptocurrencies are flying around in different countries. Most probably due to the recent happenings in the crypto community. Some countries even go further to ban crypto completely.

Recently, the people of Paraguay were dealing with the bills passed by lawmakers to regulate crypto transactions and impose taxes; the citizens of the United Arab Emirates were equally receiving a warning from a bank against investing in crypto.

In a recent webinar organized by the Emirates NBD (ENBD), the Dubai-based bank offered a serious warning to their customers against investing in the trending online financial market. The caution given to the people was not something out of the blue, but a topic of great concern for most investors and no-one esters alike, and probably the reason some countries do not want their citizens participating in the market.

Dubai Warning

The bank warned against the highly volatile nature of Bitcoin and other digital coins. In a statement made by Georgio Borelli, the head of assets allocation and quantitative strategies, he stated that before digital currencies get adopted into the broader financial system, their volatility has to reduce substantially.

He emphasized that institutional investors and fund managers cannot invest in crypto at such a high volatility rate. However, he also added that the risky and volatile nature of the market is what attracts a lot of people to it.

Speaking about the institutions that have embraced the new technology and reaped large fruit from it, Borelli said that the growth and adaptation of crypto were made possible because it is used by many people in society and is also an exciting venture. He further stressed that the digital coins do not have any place with institutional investors, at least, not yet.

In his comparison between the volatility of digital coins and other assets that are equally risky, like credit and equity, the banker notes that crypto does not offer a fair, positive return, unlike other assets; hence, investors will not adopt these coins.

Still, at the Global Investment Outlook 2021 Webinar organized by Emirate NBD, Borelli mentioned other setbacks that the crypto community faces, such as money laundry, viable mining, and counter-terrorism financing regulations. He added that it is not certain what the future holds for crypto and that some of the currencies will not survive and not be accepted universally.

The Good Side of Cryptocurrency Volatility

While there seem to be a lot of concerns and talk about the highly volatile nature of cryptocurrencies, it is important to note that there is a good side to this disturbing property of digital coins, which is why many people still invest in it regardless of naysayers. People who adopt crypto are those who do not mind taking risks. They focus on the positive and are ready to bear the loss when the negative happens.

The limited supply of digital currencies causes volatility. This means that there is usually a fixed amount of a currency in the market, and the number can’t be increased. Whenever the demand for a currency exceeds the number of traders willing to sell their coins, there will be a natural increase in the price.

Generally, the high volatility of digital currencies is not bad; it only depends on the individual. The population of the crypto community is dominated by young males who are apparently the set of people more disposed to taking risks. As much as it is easy to lose money in the system, it is also easy to make a large amount of money within a short time. It is therefore important to note that digital trading is not a call for individuals who prefer to preserve their wealth.

Lower volatility will give a lower price movement and a lower likelihood of earning the desired profit. Although higher volatility means higher risk, it also means that profits are more likely to be made within a short time.

Verdict

Although the fears making the rounds on the volatility of digital currencies are real and understandable, it is also important to note that the very risky nature of the investment makes it exciting and highly profitable. Individuals and institutions who have chosen to look beyond the risks are benefiting from it. Still, it is important not to jump into the system without fully understanding its pros and cons.

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