The statement came in the same week that the price of bitcoin, ethereum and litecoin all hit record highs.

Swiss private bank Julius Baer has told investors to “stay away from bitcoin” and crypto-currencies, as they pose an “economic risk of crippling deflation” and are underpinned by “immature technologies”. 

“As an investor, stay away from crypto,” the firm said in a statement posted on its website. “We are negative on bitcoin and other currently existing permissionless crypto-currencies due to regulatory, technological and economic risks. We believe, counter-intuitively, that blockchain-based ‘coins’ are actually extremely deficient currencies, as their terminal coin supply and velocity are both capped, making them highly deflationary if widespread adoption occurs.”

The statement came in the same week that the price of bitcoin, ethereum and litecoin all hit record highs. It also followed the launch of bitcoin futures on an exchange operated by Cboe Group, while its larger rival CME Group is expected to list its own version of bitcoin futures next week. 

But for Julius Baer, “bitcoin and crypto-currencies are immature technologies which face severe technological (e.g. cybersecurity), governance (e.g. the power of ‘miners’ on blockchain networks) and regulatory hurdles.

“The latter is especially pronounced: we do not expect that sovereigns will long close an eye to a new technology which potentially harms retail and institutional investors while providing a safe haven to money laundering, tax evasion and organised crime.”

Sceptics of bitcoin have said that mindless speculation is fuelling its rapid price surges, and that the first ever crypto-currency is showing all the signs of a bubble about to burst.

For example, Jamie Dimon, JP Morgan’s chief executive, touted bitcoin as a “fraud” that would “likely blow up” several months ago. 

On the other hand, some analysts have forecasted prices as high as $100,000 per bitcoin in less than a decade. Given that the current market cap of crypto-currencies is hovering above half a trillion dollars eclipsing many of the world’s largest companies and banks, it could be economically fatal if bitcoin’s price were to rocket to such levels. 

However, blockchain, the technology underpinning crypto-currency transactions, is revolutionary, Julius Baer has said, but mass hysteria around digital coins could stifle its growth. 

“With all that said, blockchain and cryptocurrencies are an amazing technological development, combining advances in cryptography and network theory to sustain an extraordinary monetary experiment,” the bank said. “We believe the hype right now is very detrimental to the long-term survival of the technology, and expect to know more about beneficial use cases once the dust has settled.”

A blockchain is a virtual distributed ledger of transactions shared peer-to-peer that can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. 

The technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

While big banks have generally steered clear of bitcoin and crypto-currencies – with the exception of a few, such as Goldman Sachs – they have spent millions of dollars investing in blockchain-related ventures.