Due to the current macroeconomic environment, investment banking giant JPMorgan Chase is increasingly looking around for alternative investments. In the process, Bitcoin and other cryptocurrencies established themselves as favorites along with hedge funds, with the big bank downgrading real estate.
In a message to investors, JPMorgan commented on its rebalancing of alternative asset classes. The big bank reclassifies digital assets as undervalued and in the future, it would have to become more cautious in private equity, private debt as well as real estate. According to the analysts' ratings, Bitcoin (BTC) would be "fairly" valued at USD 38,000, despite bearish sentiment in the wake of the Terra Luna debacle and general macroeconomic turmoil.
Capitulation due to external factors
JPMorgan analysts are not impressed by the recent downtrend. In addition to the collapse of the largest algorithmic stablecoin and its $60 billion ecosystem, the market also had to contend with the Russia-Ukraine conflict and rising interest rates from the Federal Reserve. According to the investment banking giant, these were all external influences that pushed the price below its actual value.
"The past month's crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally." - JPMorgan strategists led by Nikolaos Panigirtzoglou
How well the crypto market recovers depends on one crucial factor; venture capital (VC) funding. JPMorgan suspects a continuation of the billion-dollar VC funding, which is why the long "crypto winter" of 2018/2019 should not repeat itself. According to strategists, there would be little sign of this trend slowing down in return, which is underscored by venture capitalist a16z's latest $4.5 billion fund. This should secure a floor for the crypto market that was not present in previous cycles.
Digital assets as an alternative asset class
Given the severe macroeconomic conditions, JPMorgan is currently placing a heavy weight on alternative investments; investments that are neither in stocks, bonds, or cash. Due to rising mortgage rates, the big bank downgraded real estate for the coming quarter and named cryptocurrencies and hedge funds as the "most attractive alternative investments."
In doing so, JPMorgan is continuing a trend of institutional adoption in the United States, exemplified by the involvement of other financial services firms such as Goldman Sachs, Citibank, and Fidelity Investments. JPMorgan itself has allowed clients to invest in crypto funds since July 2021, and in February this year became one of the first banking giants to enter the metaverse.
