JPMorgan analyst: Cryptocurrency is the “worst tool” to hedge against stock depreciation

Analysts at U.S. investment bank JPMorgan Chase have issued another skeptical statement on Bitcoin, arguing that the current price of Bitcoin is far above its fair value.

JPMorgan Chase & Co. said in a regular memo to investors that cryptocurrencies such as Bitcoin are an "economic sideshow" and the worst possible hedge against falling stock prices, Reuters reported on Friday.

JPMorgan analysts said Bitcoin's mainstream adoption has strengthened its correlation with cyclical assets, making it less attractive for portfolio diversification.

“Crypto assets continue to rank as the worst hedge against sharp equity declines, their diversification benefits are questionable at a time when prices are well above production costs, while their correlation with cyclical assets is rising as holding cryptocurrencies becomes mainstream.”

In January 2021, JPMorgan strategists John Normand and Federico Manicardi believed that Bitcoin is becoming a cyclical asset rather than a tool to hedge against market pressure.

Cyclical assets refer to stocks that follow a certain trend that depends on a specific business cycle. For example, companies in non-essential industries such as restaurants, hotels, airlines, furniture companies, and automobile companies. As Cointelegraph previously reported, the question of whether Bitcoin is a cyclical or non-cyclical asset remains controversial, and many industry participants strongly believe that cryptocurrencies are a good hedge against market crises.

Shortly before these latest comments from JPMorgan, the company's co-president Daniel Pinto said that JPMorgan would eventually have to get involved in Bitcoin due to growing customer demand. In October 2020, when Bitcoin was trading at $13,000, JPMorgan predicted that the price of Bitcoin would double or triple in the long term. (Cointelegraph)