Bitcoin is a Poor Hedge Against Equities, JPMorgan Analysts Say
JPMorgan Chase & Co strategists have warned that BTC’s price could be in bubble territory as it’s significantly higher than their estimated fair value. Furthermore, the analysts believe that bitcoin, and other cryptocurrencies, have failed to serve as a hedge to equities.
JPM’s Swinging BTC Opinion
After being somewhat positive on BTC for months, claiming that the asset has taken some of gold’s market share because of the skyrocketing demand, JPM has changed its tune on the cryptocurrency.
Firstly, strategists led by Nikolaos Panigirtzoglou questioned the sustainability of bitcoin’s record-breaking rally and asserted earlier this week that the asset’s volatility prevents it from surging even more.
During a more recent bitcoin assessment, the analysts touched upon the cryptocurrency’s infamous volatility once more. They asserted that the double-digit price swings coming from the asset had turned it into an “economic side show” and a poor hedge against a potential decline in stocks.
“Crypto assets 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.”
Bitcoin Trades Well Above Its Fair Value
Although JPM’s strategists failed to provide their precise fair value of BTC, they claimed that the cryptocurrency sits well above that level. As such, they joined Deutsche Bank saying that the asset is in a bubble state and could soon reverse its trend and head for a steep correction.
Previously, they were firm believers that bitcoin’s price could continue to increase as long as the demand for Grayscale’s Bitcoin Trust was there. However, it seems that even the growing demand for GBTC and the entrance of large names such as Tesla would not be able to drive the cryptocurrency upwards, according to their analysis.
In contrast to JPM’s opinion comes Rick Rieder. The managing director of the world’s largest asset manager, BlackRock, recently said the institution is “dabble a bit into” bitcoin as a possible option to diversify its portfolio. He asserted that BlackRock sits on a lot of cash because traditional hedges don’t work in these situations.
