Bitcoin Is a Sideshow & a Poor Hedge, but It’s Mainstream – JPMorgan
Bitcoin (BTC) may be surging to never-seen-before heights as the week draws to a close, with prices surpassing the USD 53,000 mark for the first time today, but not everyone wants to sing its praises – nor those of altcoins – as JPMorgan’s analysts poured some water on the crypto fire.
The company has unveiled a new report that makes considerable mention of BTC prices. Economic and crypto commentator Alex Krüger shared the report’s executive summary on Twitter, and the matter was also covered by Reuters.
And it looks like BTC is firmly on the agenda at JPMorgan, with an executive last week claiming that the firm was “open-minded about bitcoin.”
But the latest report is far less complimentary, dismissing the token’s rise as a “sideshow,” and calling it and altcoins a “poor hedge.”
Its authors wrote,
“The rise of bitcoin is an economic sideshow, but [it] is here to stay as an ‘alternative’ currency.”
The analysts added that the “real financial transformational story of the COVID-19 era” was the “rise of fintech,” but conceded that Tesla and other companies’ BTC moves pointed to “increased investor demand and interest in transacting payments in cryptocurrencies.”
And there was more gloom in the JPMorgan forecast, with warnings that BTC’s “current prices are well above our most recent estimates of fair value based on mining costs and risk capital equivalence with gold.”
The authors added,
“In the long term, we estimate that theoretically bitcoin prices would need to rise to USD 146k for the market cap to match the total private sector investment in gold via [exchange-traded funds] or bars and coins.”
And while the firm’s analysts feel that the companies and private individuals who are turning to BTC as a hedge are barking up the wrong tree, they admit that the token has become “mainstream,” writing,
“Cryptoassets continue to rank as the poorest hedge for major drawdowns in Equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed.”
And there was a warning about tether (USDT)’s possible role in a potential BTC slump, as the authors advised bitcoiners to “watch the tail risk to bitcoin markets,” claiming that “a sudden loss of confidence in USDT would likely generate a severe liquidity shock, jeopardizing access to the largest pools of demand and liquidity.”
JPMorgan has mentioned the USD 146,000 price target before this year, but also warned that “speculative mania” was driving BTC prices, and called the rise “unsustainable.”
At the time of writing (12:25 PM UTC), BTC trades at USD 52,710, correcting lower from its new all-time high of USD 53,194, reached a few hours ago, per Coingecko.com data. The price is up by 3% in a day and 10% in a week. It rallied by 46% in a month and 420% in a year.
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