No digital gold – JPMorgan sees Bitcoin as a „cyclical“ financial product
Two JPMorgan analysts see Bitcoin as a „cyclical“ financial product, contradicting the thesis of their colleagues.
Bitcoin’s (BTC) recent record run makes the market-leading cryptocurrency more of a „cyclical“ investment product than a stable-value hedge, according to two analysts at major US bank JPMorgan Chase.
Accordingly, JPMorgan analysts John Normand and Federico Manicardi believe that investors who use Bitcoin to diversify their portfolios are taking a risk. According to a report obtained by financial news portal Ethereum Code, the two analysts see Bitcoin as „the least stable hedge in times of crisis.“
To this end, they explain:
„By moving into the mainstream, cryptocurrency is showing increasing correlation with cyclical financial products, turning it from a hedge to a risk investment.“
„Cyclical“ financial products are those stocks that depend on the market performance of the economy, or economic cycles, and therefore fluctuate. Depending on whether the goods and services of the associated companies are in demand, the corresponding security develops. In an overall economic downturn, the products of these companies usually suffer the most, which inevitably drags down their shares as well.
Cyclical shares are mostly securities of companies from the catering, tourism, aviation, automotive and similar industries.
Nevertheless, analysts concede that the cryptocurrency makes sense for investors concerned about devaluation of national currencies through inflation and political interference.
JPMorgan analysts led by Nikolaos Panigirtzoglou
However, the assessment that Bitcoin should therefore not be seen as a stable-value hedge or „digital gold“ contradicts the view of some of the two analysts‘ colleagues, as several other JPMorgan analysts led by Nikolaos Panigirtzoglou have recently concluded that Bitcoin is taking more and more market share from the market-leading precious metal.
Thus they had written:
„The adoption of Bitcoin by institutional investors has only just begun, while the adoption of gold by institutional investors is already advanced. If this medium- to long-term thesis is confirmed, gold will face structural headwinds in the coming year.“
Cyclical financial product or not, currently Bitcoin is definitely showing high volatility. Within just three weeks, the price of the cryptocurrency more than doubled from 20,000 to 42,000 US dollars, before falling back to below the 30,000 US dollar mark in recent days.