Only a „side attraction“ – JPMorgan criticises Bitcoin as overvalued
With the renewed scolding, the analysts contradict their management, which believes a future investment in Bitcoin is likely.
Analysts at major investment bank JPMorgan Chase are again expressing scepticism about Bitcoin (BTC), categorising the cryptocurrency’s actual value, or „fair value“, as far lower than its current record price indicates.
In a circular to investors, JPMorgan accordingly argues that Bitcoin is merely „an economic sideshow“ compared to other financial technology innovations. Moreover, the Bitcoin Trader market-leading cryptocurrency is arguably the „poor hedge against falling equity prices“, as Reuters reports the analysts‘ assessments.
Accordingly, mainstream adoption would ensure that the correlation between Bitcoin and cyclical financial products, first and foremost equities, becomes ever stronger. This, in turn, would make the crypto market leader all the less attractive for diversification:
„Cryptocurrencies remain the worst hedge against sharp downturns in the equity market because the questionable benefits of diversification are bought at a price far above the cost of production, while the correlation with cyclical financial products is increasing anyway due to the arrival of cryptocurrencies in the mainstream.“
In January 2021, JPMorgan analysts John Normand and Federico Manicardi had already claimed that Bitcoin is now becoming a cyclical financial product in its own right, which is why the cryptocurrency would no longer be suitable as a hedge against those very products.
As a rule, „cyclical financial products“ are understood to be shares whose price development depends on certain business cycles. Examples of this are the shares of companies in sectors such as gastronomy, tourism and car manufacturing. As Cointelegraph had reported, however, it remains unclear whether Bitcoin can actually be classified as a cyclical financial product, as many experts see the crypto market leader as a good hedge for the stock market, which would contradict this thesis.
The latest criticism from JPMorgan comes just days after co-president
Daniel Pinto confirmed that the major investment bank will have to invest in Bitcoin sooner or later. When Bitcoin was still at $13,000 in October 2020, JPMorgan had even made the optimistic prediction that the price would double or triple in the long term. This makes the renewed scolding all the more surprising.
At the time of going to press, Bitcoin is at 52,764 US dollars, which corresponds to a gain of more than 80 % in the last 30 days. After breaking the psychologically important 50,000 US dollar mark for the first time on 16 February, the cryptocurrency even briefly surpassed 53,000 US dollars today.