The recent price escalations of the digital currency bitcoin make it a shaky long-term investment, J.P. Morgan said in a memo, Reuters reported on Friday (Feb. 19).
“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,” according to J.P. Morgan analysts.
Some backers of the cryptocurrency have argued that it’s “digital” gold and a solid investment amid growing inflation and a declining dollar value.
Bitcoin hit $51,116 on Friday, down from Wednesday’s record high of $52,640. Ether reached a record of $1,951, Reuters reported.
These price levels make the asset overvalued, which negates diversification benefits, J.P. Morgan said. Bitcoin would have to hit $146,000 for its market capitalization to equal total private-sector investment in gold via exchange-traded funds or bars and coins.
Mainstream acceptance of cryptocurrency triggered a 45 percent escalation in bitcoin prices so far this month, which was furthered by Tesla’s $1.5 billion investment in the currency. Mastercard and BNY Mellon also made bitcoin investments.
Tesla CEO Elon Musk said on Thursday (Feb. 18) that holding bitcoin is only slightly better than holding cash.
Goldman Sachs, ICAP, JPMorgan, and UBS have all bought into the first exchange-traded product (ETP) that offers exposure to Polkadot’s DOT cryptocurrency, Coinbase reported. The shares debuted Feb. 4 on the SIX Swiss Exchange at a price of $22-23.
Cryptocurrency has so far defied accurate forecasting, but some market dynamics could bring about more thorough analysis. Bitcoin is not intended to compete against the dollar.
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