JPMorgan Reports That Crypto Might Be Here To Stay
JPMorgan has published a detailed report explaining what crypto-technology is, many of its potential use cases, and the current obstacles it faces. The 71-page document points out that crypto-market participants have increasingly begun to carefully examine and study digital currencies and their underlying blockchain technology. Furthermore, the lengthy write-up discusses the various challenges cryptocurrencies pose to the world’s traditional financial infrastructure.
Besides going over very basic facts about when the Bitcoin whitepaper was released and the volatile nature of the crypto-market, the report, entitled “Decrypting Cryptocurrencies: Technology, Applications and Challenges”, makes quite a surprising assertion. Notably, the Technology section of its Executive Summary states that digital currencies “are unlikely to disappear completely”. This statement is really unexpected when you consider that it’s coming directly from JPMorgan. That’s because Jamie Dimon, the bank’s chief executive, called bitcoin a fraud back in September 2017, and said it just wasn’t a “real thing”. Dimon also remarked that “it” would come to an end. Although Dimon later regretted referring to Bitcoin as a scam, the high-profile executive made sure to express his continued lack of interest in digital currencies.
Current Applications & Challenges
In the Applications section of the report’s Executive Summary, the vast number of potential applications of blockchain technology were acknowledged and summarized. The write-up also mentioned that hedge funds had entered the crypto-market while noting that they constituted the majority of the total 175 cryptocurrency funds. Admittedly, most of the report was pretty redundant to the avid crypto-watcher since it discussed topics spoken about ad nauseum such as risks crypto-investors face and money-laundering issues. However, there were some parts worth reading. For instance, the following was written about fiat currencies:
“It will be extremely hard for CCs [cryptocurrencies] to displace and compete with government-issued currencies, as dollars to euros and yuan are virtual natural monopolies in their regions and will not easily give up their seigniorage profits”.
Although the bank’s opinion that traditional currencies won’t disappear has been shared before, it is still one of the most noteworthy parts of the paper. In fact, it’s what financial analysts and economists have been endlessly arguing about. So, JPMorgan’s take on this issue will likely lead to more interesting dialogue on this subject.
Crypto Could Help Diversify Portfolios
Perhaps the most thought-provoking part of the report is the explanation of how cryptocurrencies “could potentially have a role in diversifying one’s global bond and equity portfolio”. The reason for this, according to JPMorgan, is that despite being highly volatile, cryptocurrencies have managed to yield “high returns over the past several years” while exhibiting a “low correlation with major asset classes”. Per the report, if cryptos are able to last for a few more years, they are likely to offer more stable returns, and even have correlations similar to gold and the Japanese Yen.
Kindly note that this article attempts to capture the most newsworthy components of JPMorgan’s cryptocurrency report. The objective of this piece of writing is to help encourage more positive and constructive discourse related to crypto-technology. Therefore, please refer to the actual report itself for all the details.