JPMorgan published a report on the 21st that questioned the utility of bitcoin as a reliable means of hedge (avoiding) investment risk.
JPMorgan’s strategists Federico Manicadi and John Normond argued in a report that Bitcoin is “the most unreliable hedge vehicle during periods of rapid market stress.” It raised questions about the utility of Bitcoin as a reliable alternative investment asset in times of high economic uncertainty.
“Mainstreaming will eventually offset the advantage of enabling (portfolio) diversification, which will lead to poor performance in times of economic crisis.”
The report argued that “the correlation between bitcoin and the traditional market is increasing recently,” and that if a strong positive correlation persists, “over time, it will erode the value of diversification.”
According to Coinmetrics data, the correlation between Bitcoin and the S&P500 index over the past 180 days is 0.23, showing a relatively weak correlation. However, this is a marked increase compared to a year ago.
The close correlation between bitcoin and traditional market prices and the mainstreaming of cryptocurrency investments generally mean “the possibility of cryptocurrency being converted from insurance to leveraged instrumentation,” the report analyzed.
The bitcoin price, which hit $42,000 in the first week of January, fell below $30,000 on the 22nd.
Other strategists at JPMorgan also published a report in October 2020 stating that bitcoin is more of a risky asset than a safe asset.
Translation: In-sun Jeong/Coindesk Korea
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