Cryptocurrency assets – and hedge funds – have replaced real estate as preferred asset classes, according to a group of strategists at US investment bank JPMorgan Chase & Co.
In an investment report, the strategists, led by Nikolaos Panigirtzoglou, also said bitcoin (BTC) is trading at a discount of up to 30%.
“While public markets are already pricing in significant recessionary risks and digital assets have significantly repriced following the collapse of TerraUSD (UST), some alternative assets such as private equity, private debt and real estate seem to have lagged somewhat,” he said.
“We are thus replacing real estate with digital assets as the preferred alternative asset class.”
However, the bank’s strategists downgraded alternative investments – those types of assets other than stocks, bonds or cash – from “underweight” to “overweight”, citing ongoing macroeconomic difficulties.
JPMorgan expects returns on alternative assets such as cryptocurrency to hit 10% over the next year. This compares to a 12% return for traditional assets.
Bitcoin 30% undervalued, according to JPMorgan
Although the market is still reeling from the recent selloff, Panigirtzoglou and his team are confident that bitcoin will recover soon.
Strategists argued that the fair value of bitcoin is $38,000, based on its volatility ratio against gold. This means that at the current price of around $29,600, BTC is trading at a discount of almost 30%. They said:
“Last month’s crypto market correction looks more like a capitulation from last January/February, and looking ahead, we see an upside for bitcoin and crypto markets more generally.”
JPMorgan strategists seemed optimistic about the future of the crypto industry, as long as venture capital funding continued to flow. They stated that “the trajectory of venture capital funding would be crucial in helping the crypto market avoid the long winter of 2018/2019.”
In their view, venture capital firm Andreessen Horowitz has announced that it will inject $4.5 billion into crypto startups to capitalize on the market downturn.
JPMorgan CEO Criticizes Crypto
JPMorgan has started offering crypto services to its clients despite CEO Jamie Dimon’s harsh criticism of bitcoin.
In 2017, Dimon attacked bitcoin, calling it a “fraud”. He doubled down on the review last October and said the digital asset was “worthless”. But he decided to let his clients make up their own mind because they were “adults”.
“So if they want access to buy bitcoin, we can’t keep it, but we can give them legitimate access, as clean as possible,” Dimon said at the time.
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