Bitcoin is an Unreliable Hedge During Market Upheavals: JP Morgan Analysts

For anybody else in Wall Street, JPMorgan Chase & Co. cross-asset strategists have bad news that Bitcoin is the warmest way of diversifying portfolios worldwide that are short on hacks but are large on valuation risk.

Bitcoin has proven to be lazy at compensating for short-term downsizes in large-scale sales, its popularity among retailers also increases the link between the token and cyclical assets, according to their research. Crypto investment could best be viewed as a safeguard against the loss of belief in the currency or payment system of a country — rather than a gold-like competitive.

While acknowledging Bitcoin’s appeal as a response for investors that are worried about political shocks, the team warned that it will not soon act as a defensive traditional asset. Cryptor ownership mainstreaming increases correlations with cyclic assets and potentially translates them from insurance to leveraging, they added.

Unlike anything Wall Street has seen, the Bitcoin trajectory has been so far, and the debate among professionals is heating up. Nikolaos Panigirttoglou proposed that Bitcoin might reach 146,000 dollars in the long term by drawing cash from investors who had previously bought gold at a Normand colleague at JP Morgan early in January.

Bitcoin’s relation to other assets was analysed by Normand and Manicardi to try to answer the issue: Can investors use the tool for portfolio diversification? Bitcoin has had a low correlation with hedges in the past five years, such as game, treasure and yen, which makes it useful for investors that have a wide portfolio.

However, opinions remain sharply divided as to whether cryptocurrencies are a new digital age asset or whether speculative frenzy is gone haywire. In 2017, when the wave of renewed Wall Street interest and speculation in Robinhood was again fueling prices, the market slept heavily until last year.

After exceeding $40,000, the Bitcoin price gradually retreated at the beginning of January and traded around $32,000. Bitcoin has already achieved the fastest ever price appreciation of any asset which is a must-have,” said Normand and Manicardi. Bitcoin’s relation to other assets was analysed by Normand and Manicardi to try to answer the issue: Can investors use the tool for portfolio diversification?

Bitcoin has had a low correlation with hedges in the past five years, such as game, treasure and yen, which makes it useful for investors that have a wide portfolio. But in the recent run-up, the dynamics have changed, and the traditional cyclical markets are more in keeping with Bitcoin.

If it were sustained, this could, over time, erode the value of diversification, they said.

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