Crypto is ‘poorest hedge’ for drawdowns in equities, JPMorgan analysts say

Crypto is ‘poorest hedge’ for drawdowns in equities, JPMorgan analysts say


Analysts at American investment bank JPMorgan Chase have delivered another skeptical statement on Bitcoin (BTC), arguing that its current price is much higher than its fair value.

In a regular memo for investors, JPMorgan argued that cryptocurrencies like Bitcoin are an “economic side show” and the poorest hedge against a decline in equity prices, Reuters reports Friday.

The analysts said that the mainstream adoption of Bitcoin increases its correlation with cyclical assets, which makes it a less attractive asset for portfolio diversification:

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“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed.”

In January 2021, JPMorgan strategists John Normand and Federico Manicardi argued that Bitcoin has been becoming a cyclical asset, opposed to a hedge against market stress.

A cyclical asset refers to stocks that follow a trend depending on

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