JPMorgan’s strategists suffer with reportedly found bitcoin’s market structure to be more resilient than those of currencies, equities, Treasuries, and gold. In a new set forth on bitcoin’s stress test, JPMorgan wrote that cryptocurrencies have “longevity as an asset class.”
In a new report named “Cryptocurrency takes its first stress test: Digital gold, pyrite, or something in between?” JPMorgan’s strategists say bitcoin is looking “mostly despotic,” Bloomberg reported Friday. The report, led by head of U.S. interest rate derivatives strategy Joshua Younger and cross-asset inspect analyst Nikolaos Panigirtzoglou, shows that cryptocurrencies have “longevity as an asset class.”
The report examines bitcoin, cryptocurrencies, and other fiscal assets as they plunged in March when the coronavirus pandemic exploded in the U.S., causing shutdowns that crippled the saving. While bitcoin crashed to under $4,000, it bounced back faster than most other assets and regained most of its value by the end of April. Moreover, bitcoin’s valuations did not diverge much from intrinsic levels during the March terror. “Though the bubble collapsed as dramatically as it inflated,” the strategists wrote:
Bitcoin has rarely traded below the cost of in, including the very disorderly conditions that prevailed in March.
The JPMorgan strategists also found that the cryptocurrency’s “premium action points to their continued use more as a vehicle for speculation than medium of exchange or store of value,” noting that bitcoin performs to have been correlated to riskier assets like equities.
Furthermore, the report describes that there were few notices of a flight to liquidity within the asset class, as most cryptocurrencies collectively fell in March. Concluding that bitcoin seedy its stress test well, the strategists wrote: “there is little evidence of run dynamics, or even material quality tiering supply cryptocurrencies, even during the throws of the crisis in March.”
The report also explores “liquidity, or the bid-offer spread of the on the fritz book, which is directly related to volatility. When the order book thins, a given transaction could effect in a larger price change, and vice versa,” the news outlet conveyed. “Though bitcoin saw among the most ruthless drops in liquidity around the peak of the crisis, that disruption unwound itself much faster than other asset savoir faires.” According to the publication, the strategists wrote:
The coin’s market structure turned out to be more resilient than those of currencies, tolerances, Treasuries and gold.
JPMorgan has come a long way in its recognition of bitcoin. In September 2017, CEO Jamie Dimon called bitcoin a “barracuda,” only to regret saying it a few months later. Now JPMorgan Chase is even providing banking services to bitcoin traffics: Coinbase and Gemini. Last month, the company agreed to pay $2.5 million to settle a class-action lawsuit for overcharging bills for crypto transactions.
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