Bitcoin becoming a cyclical asset, not a hedge, according to JPMorgan strategists
Bitcoin becoming a cyclical asset, non a hedge, according to JPMorgan strategists
Strategists at the Wall Street megabank disagree with their colleagues view that Bitcoin is becoming digital gold.
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The Bitcoin (BTC) bull market has put the flagship cryptocurrency on par with cyclical avails as opposed to a hedge confronting 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 study obtained by Bloomberg, the strategists called Bitcoin the "to the lowest degree 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 avails typically refer to stocks that follow the trend in the overall economy, which means their performance depends on the business bike. 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, piece of furniture, automobile and other discretionary industries.
While seemingly arguing confronting Bitcoin'southward "digital gold" narrative, the strategists acknowledged that the cryptocurrency may exist 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 abroad from precious metals. As Cointelegraph reported final month, Panigirtzoglou and colleagues argue that only a small reallocation from gilt 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 past institutional investors is very advanced. If this medium to longer-term thesis proves correct, the toll of aureate would suffer from a structural headwind over the coming years."
Confronting the properties of these competing views, Bitcoin remains a highly volatile asset. The cryptocurrency more than than doubled in price over a iii-calendar week period, going from $20,000 to near $42,000, before seeing a pullback in bullish momentum earlier this calendar month. It has since corrected roughly $ten,000 from its all-fourth dimension high, including a xx% drib over the by 7 days.
Source: https://cointelegraph.com/news/bitcoin-becoming-a-cyclical-asset-not-a-hedge-according-to-jpmorgan-strategists
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