According to analysts at JPMorgan Chase, the Bitcoin bull run put the flagship cryptocurrency at level with cyclical assets as compared to a hedge against market tension.
John Normand and Federico Manicardi, strategists at JPMorgan, say that everyone betting on Bitcoin as a fund diversifier is putting themselves at danger. The strategists named Bitcoin the “least reliable hedge during periods of acute market stress” in a Thursday note obtained by Bloomberg. They added: “The mainstreaming of crypto ownership is raising correlations with cyclical assets, potentially converting them from insurance to leverage.”
Usually, cyclical assets refer to stocks tracking the trend in the overall economy, meaning that their output depends on the business cycle. These businesses manufacture goods and services that, when the economy is doing well, are in demand. Consequently, as the economy weakens, these are some of the first things people neglect.
Cyclical stocks include restaurant, hotel, airline, furniture, automobile and other discretionary industries. Although arguing seemingly against the “digital gold” narrative of Bitcoin, the strategists noted that the cryptocurrency could be acceptable for investors concerned about policy shocks and the systemic devaluation of fiat currencies.
In that vein, their opinions appear to vary from Nikolaos Panigirtzoglou’s fellow JPMorgan strategists who agree that Bitcoin is driving buyers away from precious metals. Panigirtzoglou and colleagues claim, as Cointelegraph noted last month, that only a slight reallocation from gold to Bitcoin can create “structural” headwinds for the precious commodity.
