New JPMorgan Report Shows Cryptocurrencies Are “Unlikely to Disappear”
The American multinational banking giant - JPMorgan - has been quite whimsical in its stand relating to cryptocurrencies. Last year in September 2017, JPMorgan boss Jamie Dimon verbally bashed cryptocurrencies and specifically Bitcoin calling it a ‘fraud’. Following Jamie’s criticism, Bitcoin had a tremendous run till the year-end hitting an all-time high of $20,000.
Earlier this year, Jamie Dimon accepted that he ‘regrets’ his statement on Bitcoin and also went to praise the blockchain technology which back Bitcoin and other cryptos. In yet another surprising move, the bank’s Global Research unit has recently released a report, entitled "Decrypting Cryptocurrencies: Technology, Applications and Challenges” which shows that the bank holds a positive stand on cryptocurrencies going ahead.
In the 71-page report, the bank’s research unit talks on a range of subject pertaining to blockchain and cryptocurrency while notably exploring the implications of financial firms, central banks and investors. One of the key things mentioned in the report says that going ahead, cryptocurrencies can play a crucial role in the diversification of equity and bond policies.
The report states: “If past returns, volatilities and correlations persist, [cryptocurrencies] could potentially have a role in diversifying one's global bond and equity portfolio. But in our view, that is a big if given the astronomic returns and volatilities of the past few years.”
The report further states that "If [cryptocurrencies] survive the next few years and remain part of the global market, then they will likely have exited their current speculative phase and would then have more normal returns, volatilities (both much lower) and correlations (more like that of other zero-return assets such as gold and JPY).”
The report also goes on to praise the underlying blockchain technology and says that it has a great potential and application in areas of the current payments systems which are relatively slow. It says: “[Cryptocurrencies] are unlikely to disappear completely and could easily survive in varying forms and shapes among players who desire greater decentralization, peer-to-peer networks and anonymity, even as the latter is under threat.”
However, the report also states that going ahead, one of the biggest challenges for cryptocurrencies is that it will be extremely difficult for the cryptos to replace the existing government-issued fiat currencies “as dollars to euros and yuan are virtual natural monopolies in their regions and will not easily give up their seigniorage profits.”
In addition to this report, one of the technical analyst from the bank has recently predicted that price of Bitcoin can fall to 50% from these levels before recovering from a low of around $4,600 level. The banks concluded that it sees a "fairly high risk" of a sell-off towards the $4,605 level if the digital currency doesn't break through its resistance level between $10,128 and $10,776.
"Above $10,776 though, the door for a broader countertrend rally to $14,334 if not to $16,304 (76.4% on different scales) would be wide open.”