According to analysts at JPMorgan Chase, the Bitcoin (BTC) bull market puts the mainstream cryptocurrency on par with cyclical assets, as opposed to hedging from market pressure.
JP Morgan strategists John Normand and Federico Moneyardi say anyone who invests in Bitcoin as a portfolio diversifier is at risk. In a report released by Bloomberg on Thursday, strategists described Bitcoin as “the least reliable hedging tool in times of severe market stress.”
“The integration of cryptocurrencies increases the link with cyclical assets, potentially transferring them from insurance to operation.”
Cyclical assets generally refer to stocks that follow trends in the economy as a whole, which means that the results depend on the business cycle. These firms produce goods and services that are needed when the economy is doing well. Hence, these are some of the first things people give up when the economy weakens.
Cyclical stocks include restaurants and hospitality companies, airlines, furniture, automobiles, and other discretionary industries.
While they apparently opposed Bitcoin’s digital gold narrative, strategists acknowledged that cryptocurrency may be a good fit for investors worried about political turmoil and the systematic depreciation of fiat currencies.
As such, their views seem to differ from those of other JP Morgan strategists led by Nikolaos Banegertsoglou, who believes that Bitcoin attracts investors in precious metals. As Cointelegraph reported last month, Panigirtzoglu and his colleagues argued that even a small reallocation of gold to Bitcoin would create a “structural” headwind for the precious commodity.
They said then:
“The adoption of bitcoin by institutional investors is just beginning, while adoption by institutional investors is very far for gold. If this mission proves to be true in the medium to long term, the gold price will experience structural fluctuations in the coming years. ”
Based on these competing opinions, Bitcoin remains a highly volatile asset. The cryptocurrency price more than doubled in three weeks, from $ 20,000 to nearly $ 42,000, before the bullish momentum eased earlier this month. Since then, it has corrected about $ 10,000 from its all-time high, including a 20% drop over the past seven days.