JPMorgan & cryptos: "If you can not beat your enemy, better tame him"
A report on cryptocurrency has recently been published by the famous bank JPMorgan. Entitled "Decrypting Cryptocurrencies: Technology, Application and Challenges", this report examines the future of cryptocurrencies, and the tone clearly contrasts with the statements that the bank had used to us.
Do not buy! No, wait ... Buy!
A few months ago, the CEO of JPMorgan - Jamie Dimon - was ridiculed by the entire crypto community after unflattering statements. After calling Bitcoin "fraud" and his investors "stupid", our beloved Jamie came back on his words:
"I regret [these remarks] ... I just have a different opinion than others. I'm not really interested in the subject »Jamie Dimon
More recently, analysts at the bank have released a report on the crypto space. Within this report, detailed analyzes of market volatility, the technological aspect of cryptocurrencies as well as unexpected speculation about the future.
A diversification tool
When a banking institution of this size speaks about cryptocurrencies, one would normally expect an aggressive, even disdainful tone. Yet this report - which some have dubbed the Bitcoin Bible - analyzes in an objective and almost exhaustive way the whole concept of cryptocurrency. From the underlying blockchain technology to the challenges ahead, everything is evoked.
Among the astonishing statements from the bank, it is specified that investors could benefit from diversification involving cryptocurrencies. Indeed, high volatility coupled with low correlation with the rest of large asset classes make digital currencies a useful tool for those seeking return on investment.
"If past performance is maintained, cryptocurrencies could play a role in the diversification of bond and equity portfolios. But in our opinion, this is a "if" therefore, especially if we take into account the astronomical returns and volatilities of recent years. Under current market conditions, we do not believe that a portfolio should primarily depend on cryptocurrencies. Extract from the report
Here to stay
Another amazing assertion in this report is that cryptocurrencies are not going away anytime soon.
"It is unlikely that cryptocurrencies will disappear completely. They could easily survive in different forms among individuals who want greater decentralization, those who want to use peer-to-peer networks or those who want anonymity. Extract from the report
However, the report highlights that it may be difficult to compete with possible state cryptocurrencies, or simply to abolish the fiduciary system. In fact, this organization, which is several hundred years old, will not let its monopoly fall so easily.
"We find that [fiduciary money] tends to be a natural monopoly and that only extreme hyperinflation drives people to seek monetary alternatives. Moreover, we do not consider that cryptocurrencies correspond to the standards of what can be described as "money", their important volatility not making it a practical unit of measure. [...] Given the huge profits from running a central bank, governments will be very possessive about their legal status, and will probably fight if cryptocurrencies gain more influence nationally. Extract from the report
The main challenges
Still according to this report, three main challenges are emerging in the future of cryptos:
- It will be extremely difficult for cryptocurrency to dislodge and compete with government issued currencies. The dollar, the euro and the yuan are natural monopolies in their respective regions.
- Cryptocurrencies experience increased volatility and will face technological challenges (eg increased mining costs or piracy) and regulators increasingly concerned about the fight against money laundering and the protection of money laundering. investors.
- Security problems have increased on Bitcoin trading platforms, as hackers have infiltrated a number of them. While these hackers generate huge losses, regulators question anonymity.