JPMorgan says cryptocurrencies are now a ‘preferred alternative asset’
Banking giant, JPMorgan with Asset Under Management (AUM) of $3.11 trillion, has maintained its February 2022 stance that flagship cryptocurrency asset, Bitcoin, has a fair price of $38,000, which, under current market conditions, is 28% higher than its current level of around $29,500.
According to a note the bank issued to clients on Wednesday, bank strategist, Nikolaos Panigirtzoglou, who is the lead author of the document, stated, “The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for Bitcoin and crypto markets more generally.”
As previously mentioned, the bank investors’ note placed Bitcoin’s fair value at the same level in February. It was trading at around $43,000 at that time. The current valuation means that the banking giant is implying that Bitcoin is currently “on sale,” a term used in the cryptocurrency world to connote an undervalued asset.
What you should know
- In a note to clients, the bank has also explained that it is replacing real estate with crypto assets as its preferred alternative asset class along with hedge funds, citing “potential lagged repricing” in private equity, private debt and real estate.
- Alternative assets typically refer to investments that aren’t stocks, bonds or cash.
- In addition to rising interest rates and the fallout from the war in Ukraine, the cryptocurrency market has also had to struggle with the $50 billion collapse of LUNA and its sister token, an algorithmic stablecoin, TerraUSD (UST).
- On this, the note stated, “Thus far, there is little evidence of VC [venture capital] funding drying up post-Terra’s collapse. Of the $25 billion VC funding year-to-date, almost $4 billion came after Terra. Our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted.”
- The note also added that VC funding would be critical to avoiding that crypto winter.
- The total market capitalization of cryptocurrencies currently sits at $1.3 trillion, a massive decline from when the market nearly hit $3 trillion in November of 2021.
JPMorgan is right as funds are still flowing into the crypto space. For example, major venture capitalist, Andreessen Horowitz announced the closing of its fourth cryptocurrency fund at $4.5 billion.
Also on Wednesday, crypto-focused venture firm NGC Ventures launched its third blockchain fund with $100 million raised from investors that included Babel Finance, Huobi Ventures and Nexo Ventures.
JPMorgan CEO, Jamie Dimon has repeatedly expressed his personal antipathy toward cryptocurrency, going so far as to call it a fraud, but the bank, itself, has taken a more practical stance. It became the first major bank in the Metaverse earlier this year. Dimon has however, praised crypto for its cross-border payment facility.