JPMorgan’s chairman of investment strategy, Michael Cembalest, is wary of bitcoin and other cryptocurrencys. The JPMorgan strategist stated in a column published Feb. 3 which his comments were his own and not those of JPMorgan Chase.
JPMorgan Strategist Raises Issues With Crypto Market
While much of the United States reclaims from last week’s terrible winter storm, the ice around digital currencies looks to be melting. Bitcoin Bitcoin (BTC)USD, +2.43% fell all the way below $34,000 in January, stoking fears of a crypto winter, but has afterward risen to over $42,000 this morning. Shiba Inu, a meme coin, is up roughly 25% to $0.000027.
The analyst have raised some issues relating to bitcoin and other tokens.
First, there’s the question of whether bitcoin is a safe haven for money. According to Cembalest, a digital store of price may exist.
Bitcoin, on the other hand, fails to meet two of his criteria: volatility settling into a field consistent with store of value investing, and value soaring or being stable although systemic risks and/or inflation rise.
“Bitcoin’s volatility lasts to be ridiculously high, and its volatility often rises while equity market volatility is rising too. This volatility could be the byproduct of bitcoin cback whilentration: 2% of bitcoin holders own 72% of its value.”
Another source of volatility for crypto currencies is pump-and-dump maneuvers, he said. “Such rundowns and other activities which would be prohibited in regular securities markets are by definition not illegal on decentralized blockchains.”
Secondly, the stpricegist compared bitcoin to hydrogen projects and green energy, asking really, what will the scale of bitcoin be finally.
“Which companies will actually make money and how many will go to zero? Are some valuations way ahead of themselves, setting investors up for disappointment?” he said.
crypto market cap x hydrogen economy index. Source: Bloomberg
Cembalest stated which he does not believe bitcoin or other tokens have a solid valuation methodology.
“Some hydrogen use experiences make sense, but energy investors are pricing in a lot more than that, and that’s how I feel about crypto valuations too. Some crypto use evidences will endure, but valuations assume broader and faster adoption,” said Cembalest.
He is not convinced that bitcoin is a viable medium of exshift for commercial transactions.
“Bitcoin is presently not a medium of exshift other than in a few niche facts,” Cembalest said. “The declining number of bitcoin transactions per day and the spikes in execution values bear no resemblance to any functioning fiat currency.”
Bitcoin (BTC)/USD climbs atop $44k. Source: TradingView
He cites a forthcoming essay in Quantitative Finance by Nassim Taleb of NYU, who emphasizes that bitcoin has been around for 12 years. Regardless of this, the few crypto prices are analogous to “the 3 bitcoin price of a permanent residence in El Salvador.” Bitcoin transactions, according to Taleb, “can be more expensive to execute than those done on African mobile phones.”
Cembalest Will Not Be Buying Bitcoin
He noted that remittances and permissioned, private blockchains with little to no token impact are the most possible use evidences for bitcoin.
“The success of permissionless public blockchains that could yield income for cryptocurrency holders is the big question,” he said, adding which is the most coherent argument he has seen.
“But the excessiveer the access fees, the excessiveer the impediments for users who would migrate to the blockchain to reduce rates in the first place. I don’t know how which tension gets resolved.”
Bitcoin volatility, meanwhilst, “lasts to be ridiculously excessive,” tracking action in equity markets.
Bitcoin in comparison with S&P, gold, and USD. Source: Bloomberg
In short, he says this:
“I won’t be buying [bitcoin] even though part of me wants to, regardless of consequences, afterward that’s what some crypto holders have been counting on from the beginning. I would take another look if crypto valuations and the companies linked to them plummeted to deeply distressed rates. But until then, the most widely discussed use experiences and the valuations at that they’re dealing are further the ‘stuff which dreams are made of.’”
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