By
Godfrey Benjamin
April 17th, 2024
According to yesterday published JPMorgan’s Global Research, despite it will be very difficult for cryptos to completely displace government-issued currencies, they can play a decisive role in the diversification of global bond and equity portfolios.
The continued and overwhelming support from the global cryptocurrency community has caused JPMorgan to finally turn its view in praise for the digital assets. JPMorgan’s boss, who outrightly rejected Bitcoin last year by calling it a “fraud”, has reviewed his stand a few weeks back saying that he “regrets” his previous position. Moreover, he has also showered some praise for Bitcoin’s underlying ‘Blockchain Technology’.
In a fresh new report published on Monday, Feb 12, JPMorgan’s Global Research unit talks on the range of subjects pertaining to cryptocurrencies and blockchain while exploring the implications for financial firms, investors and central banks. The report, which is entitled as “Decrypting Cryptocurrencies: Technology, Applications and Challenges”, clearly states that the “extremely rapid growth” and “falls” in the cryptocurrency markets has forced JPMorgan and many other financial institutions to closely monitor digital currencies.
Moreover, the report further goes on to predict that one day, digital currencies will play a decisive role in the diversification of global bond and equity portfolios. It states:
“If past returns, volatilities and correlations persist, [cryptocurrencies] could potentially have a role in diversifying one’s global bond and equity portfolio. But in our view, that is a big if given the astronomic returns and volatilities of the past few years.”
Authors of the report further continue stating:
“If [cryptocurrencies] survive the next few years and remain part of the global market, then they will likely have exited their current speculative phase and would then have more normal returns, volatilities (both much lower) and correlations (more like that of other zero-return assets such as gold and JPY).”
JPMorgan boss and CEO, Jamie Dimon once said that it is just a matter of time that cryptocurrencies will be wiped out of the financial system. However, the latest published report has expressed very contrasting views to what Mr. Dimon had to say. The report states:
“[Cryptocurrencies] are unlikely to disappear completely and could easily survive in varying forms and shapes among players who desire greater decentralization, peer-to-peer networks and anonymity, even as the latter is under threat.”
The report further adds that Bitcoin’s underlying blockchain technology will have a wide implication in areas where the current payment system is very slow. However, the company in its report says that it will be very difficult for cryptocurrencies to completely displace and compete with government-issued currencies “as dollars to euros and yuan are virtual natural monopolies in their regions and will not easily give up their seigniorage profits.”
On the other hand, looking at the ongoing scenario of the cryptocurrency market meltdown, the analysts at JPMorgan has issued a wake-up call to investors based on the technical charts while predicting that Bitcoin price can drop to 50% from the current levels to a low of around $4600 levels.
As reported by Business Insider, the JPMorgan analyst states that “the question is whether we go there straight away, indicated on a failure to clear 10128 and 10776, or at a later stage after a stronger countertrend rally.” The analyst also claims that this could happen if Bitcoin doesn’t manage to break it existing resistance levels between $10,128 and $10,776. If it manages to surge past $10,776 levels, it can also climb past to up and above $14,000 ahead.