Bitcoin Is a Poor Hedge Against Stocks, Says JPMorgan Analysts

Bitcoin Is a Poor Hedge Against Stocks, Says JPMorgan Analysts


Analysts at JPMorgan Chase have warned that Bitcoin is an economic sideshow and poorest hedge against a declining value in stock prices. As per the analysts, this has resulted in the price of the flagship cryptocurrency being overvalued than its fair value.

Bitcoin Have Questionable Diversification Benefits: JPMorgan Analyst

The analyst at JPMorgan believes that in the events of Bitcoin’s mainstream adoption its value increases its correlation with cyclical assets. That itself makes it to be on one of the worst assets to be included for diversifying one’s portfolio:

“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.”

Meanwhile, the crypto community argues that the cryptocurrency is often referred to as the digital gold that can hedge against inflation and the crumbling U.S. dollar. In response to this, JPMorgan counters that Bitcoin would still need to exceed towards $146,000 in the long term for its market capitalization to reach equal to the total private-sector investment in gold via exchange-traded funds.

Bitcoin Hits $1 Trillion in Market Capitalization

Bitcoin has climbed at an unstoppable rate over recent months after breaking through its late 2017 all-time high of around $20,000 in December.

The leading cryptocurrency has hit a market capitalization of $1 trillion as its rose to a record high above $55,000 taking its weekly gain to 18%. The cryptocurrency’s valuation has risen more than 92% in 2021 alone.

Bitcoin’s spike in its price performance has mostly been fueled by its acceptance from mainstream investors and companies from Tesla Inc, Mastercard Inc, BNY Mellon to MicroStrategy. In fact, just this month, Tesla disclosed a $1.5 billion investment, while MicroStrategy announced a sale of convertible bonds of $900 million to even buy more of the cryptocurrency.

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