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UAE Emirates NBD Chief Investment officer does not advise on cryptocurrencies
Emirates NBD is a strong believer in Blockchain though…
According to a recent opinion piece writter by Maurice Gravier, chief investment officer, wealth Management at Emirates NBD, Bitcoin, Ethereum Ripple Dogecoin and many other cryptocurrencies making headlines, yet Emirates NBD private banking division does not advise on cryptocurrencies.
He touches upon the reason why. He discusses the volatility of Bitcoin for example. As he states, “Taking comparable standard measures, which don’t take into account the continuous trading, bitcoin is 5 times more volatile than the average US technology stock, for example. No doubt, it should remain so: on top of the features I just listed, the very emotional drivers of speculation are unstable by nature, and potential catalysts abound. On the positive side, growing adoption and the willingness of speculators to become rich quickly. On the negative side, a regulatory crackdown or the questionable relevance of the business model of certain tokens.”
He adds, ” This may be a paradise for day (and night) traders, but as prices have skyrocketed and participation has spread exponentially, the losses of last month are considerable. Not less than half a trillion dollars of value has been wiped out. These 12 digits are bigger than the infamous US sub-prime mortgage market which triggered the 2008 great financial crisis.”
He explains, ” As long as the fundamental backdrop remains supportive, with better virus control in the West and progressive reopening of services activity, there is no reason to expect a crypto-triggered broad market crash. Don’t get me wrong: we still expect volatility in global markets, which combine elevated valuations with unanimously bullish positioning. We do believe that interest rates have not peaked yet and will generate turbulence in the coming months. But we do not see the crypto crash as the single source of trouble, and keep on believing in a constructive outcome for the end of the year.”
He then discusses why Emirates NBD does not advise on crypto assets, as they operate in a structured framework which considers three dimensions for any investment decision: the backdrop, the valuation, and behavioral factors. He does state that Emirates NBC is a strong believer in the Bockchain technology and in its applications, yet it is still in its early days.
He adds, “But in terms of crypto assets, the issue is that we cannot estimate a fundamental price tag on it. In addition, behavioral factors look, and are proving, extremely dangerous. We see many parallels with the end of the last millennium: all the technological breakthroughs announced in 1999 happened, actually much more happened. But the market was overestimating both their short-term impact and the fact that ruthless competition would crown a few winners, not everything with a dotcom. We need some time to estimate the right price behind the value of cryptos and distinguish the geniuses from the opportunists.”
Finally in conclusion he says, ” In the meantime, even if the temptation, and the pressure, is high, we stick to our fundamental framework and look for ways to capture some of the blockchain value in assets we can understand and model.”