A woman uses a Bitcoin ATM placed in a safe cage on January 29, 2021 in Barcelona, Spain.
Cesc Maymo | Getty Images
Bitcoin is a “show economic side”, and fintech innovation is the story that will dominate financial services, according to JPMorgan.
Analysts at the bank said that despite the monster rally of bitcoin, the cryptocurrency is still affected by a number of problems that could prevent it from becoming a mass asset.
“Bitcoin prices have continued to rise with Tesla, BNY Mellon and Mastercard announcements of greater acceptance of cryptocurrencies,” JPMorgan said in a research note last week.
“But fintech innovation and increased demand for digital services are the true story of Covid-19 with the rise of online start-ups and the expansion of digital platforms in credit and payments.”
Bitcoin gained traction with major Wall Street banks and Fortune 500 companies, a development that raised its price and saw it reach a market value of $ 1 trillion last week.
Investors have made comparisons between bitcoin and gold, considering the former as a new valuable digital store due to its limited offer – the total number of bitcoin that will ever exist is capped at 21 million.
JPMorgan’s own strategies say that Bitcoin could run up to $ 146,000, as it competes with gold as a potential hedge against inflation in the coronavirus crisis.
However, skeptics remain unconvinced. Economists like Nouriel Roubini say that bitcoin and other cryptocurrencies have no intrinsic value. And a recent survey by Deutsche Bank said that investors consider bitcoin to be the most extreme bubble in the financial markets.
Digital gold?
JPMorgan strategists have said that bitcoin’s current prices appear to be “unsustainable”, unless the cryptocurrency becomes less volatile. They added their $ 146,000 price target, based on Bitcoin volatility “converging to that of gold,” which would probably take years.
Meanwhile, cryptocurrencies have “questionable diversification benefits” and rank as “the poorest hedge” against significant declines in stock prices, JPMorgan analysts said.
JPMorgan has given a boost to blockchain technology with its own cryptocurrency called JPM Coin and a new business unit called Onyx.
The growing digital funding and demand for fintech alternatives is “the true story of the financial transformation of the Covid-19 era,” according to JPMorgan.
“Competition between banks and fintech is intensifying, with Big Tech having the strongest digital platforms due to their access to customer data,” the bank said.
“The ‘co-opposition’ between ‘Fin’ and ‘Tech’ players is expected ahead, with banks stepping up investment to close the technology gap, and the battle between US banks and non-banking fintechs is also taking place on the regulatory front.”
Major technology companies such as Apple and Google have recently shown increased interest in financial services. Apple has launched its own credit card in partnership with Goldman Sachs, while Google allows users to open checking accounts following a link to Citigroup.
“Traditional banks could emerge as winners of the final game in the digital age of banking because of their advantage in the deposit franchise, risk management and regulation,” JPMorgan said.
Digital banking has grown in the era of coronavirus, with large creditors and fintechs seeing an increase in adoption as people spend more time at home due to public health restrictions.