Strategists at the Wall Street megabank disagree with their colleagues view that Bitcoin is becoming digital gold.
The Bitcoin (BTC)
bull market has put the flagship cryptocurrency on par with cyclical
assets as opposed to a hedge against market stress, according to
analysts at JPMorgan Chase.
JPMorgan strategists John Normand and
Federico Manicardi say anyone betting on Bitcoin as a portfolio
diversifier is putting themselves at risk. In a Thursday report obtained
by Bloomberg, the strategists called Bitcoin the “least reliable hedge
during periods of acute market stress.”
They added:
“The
mainstreaming of crypto ownership is raising correlations with cyclical
assets, potentially converting them from insurance to leverage.”
Cyclical
assets typically refer to stocks that follow the trend in the overall
economy, which means their performance depends on the business cycle.
These companies produce goods and services that are in demand when the
economy is performing well. Consequently, these are some of the first
items people forego when the economy weakens.
Cyclical stocks include companies in the restaurant, hospitality, airline, furniture, automobile and other discretionary industries.
While seemingly arguing against Bitcoin’s “digital gold” narrative,
the strategists acknowledged that the cryptocurrency may be suitable
for investors worried about policy shocks and the systemic devaluation
of fiat currencies.
In that vein, their views seem to diverge
from fellow JPMorgan strategists led by Nikolaos Panigirtzoglou who
believe that Bitcoin is drawing investors away from precious metals. As
Cointelegraph reported last month, Panigirtzoglou and colleagues argue
that only a small reallocation from gold to Bitcoin would generate “structural” headwinds for the precious commodity.
They said at the time:
“The
adoption of bitcoin by institutional investors has only begun, while
for gold, its adoption by institutional investors is very advanced. If
this medium to longer-term thesis proves right, the price of gold would
suffer from a structural headwind over the coming years.”
Against the backdrop of these competing views, Bitcoin remains a highly volatile asset. The cryptocurrency more than doubled in price
over a three-week period, going from $20,000 to nearly $42,000, before
seeing a pullback in bullish momentum earlier this month. It has since
corrected roughly $10,000 from its all-time high, including a 20% drop
over the past seven days.
source link : https://cointelegraph.com/news/bitcoin-becoming-a-cyclical-asset-not-a-hedge-according-to-jpmorgan-strategists
