JPMorgan Says Bitcoin is a Resilient Asset for Surviving March Meltdown
JPMorgan, one of the world’s leading investment banks, has described the world’s most dominant cryptocurrency Bitcoin as resilient for surviving March’s global financial meltdown.
In a note sent to clients on June 11, JPMorgan analysts said Bitcoin has shifted from an uncorrelated asset to one whose price now closely tracks traditional stocks.
“Though correlations were modest and mostly mean-reverting around zero for much of the past couple of years, in recent months they have moved sharply higher in some cases (equities) and lower in others (U.S. dollar, gold),” wrote the analysts led by Joshua Younger.
This is largely due to what Investors King highlighted last week that institutional investors now dictate price movement in the crypto market, not the usual retail investors.
The analysts, who usually cover traditional assets like bonds, highlighted Bitcoin’s success against traditional assets in March on a volatility-adjusted basis. They noted that the liquidity on top Bitcoin exchange platforms was surprisingly more resilient than gold, U.S. Treasury bonds and other traditional assets.
Similarly, they said while Bitcoin liquidity drop during the peak of the crisis, it rebounded faster than other assets. They said this “suggests that bitcoin saw among the most severe drops in liquidity around the peak of the crisis in March, but that disruption was cured much faster than other asset classes.”
“At this point, bitcoin market depth is above its 1-year trailing average, while liquidity in more traditional asset classes has yet to recover.”
This is coming after Goldman Sachs rubbish the dominant cryptocurrency in May, saying it is not an investment vehicle.
“Cryptocurrencies including bitcoin are not appropriate as an asset class,” stated Goldman Sachs to clients in May.
While JPMorgan did not disagree with Goldman Sachs’s position, the analysts said at least one thing is certain, Bitcoin is a resilient asset, if not a stable or useful currency.
They also agreed that the coin did not live up to its reputation as a port in a storm despite its resilient market structure during the peak of the global pandemic in March.
“There is little evidence that bitcoin and others served as a safe haven (i.e., ‘digital gold’)—rather, its value appears to have been highly correlated with risky assets like equities,” the report concluded. “This all likely points to the continued survival of the asset class, but likely still more as a vehicle for speculation than as a medium of exchange or store of value.”
