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Bitcoin is more of a cyclical asset than a “hedge”

As Bitcoin drops sharply, analysts at JPMorgan are warning investors. They believe that using BTC to diversify a portfolio is risky due to the cyclical nature of the asset.

Bad signals pile up for Bitcoin. Its value fell back below $ 29,000, registering a sharp drop during the week. This trend gives a little more credibility to the hypothesis of the investment director of Guggenheim Partners.

For Scott Minerd, Bitcoin will not set a new all-time high in 2021. “And we are likely to see a full retracement towards the 20,000 level,” he warns. In a note, experts at JPMorgan also issue a warning.

Bitcoin, “the least reliable hedge”

John Normand and Federico Manicardi are particularly aimed at investors using cryptocurrency for portfolio diversification. This puts them at risk, they say. The reason ? Bitcoin is more cyclical assets than a hedge.

And bank specialists are driving the point home that Bitcoin is “the least reliable hedge in times of acute market stress.” And almost paradoxically, it is the growing adoption of cryptocurrency that could justify this trend.



This adoption would lead to an increasing correlation of Bitcoin with the rest of the market’s assets. “The democratization of crypto ownership increases correlations with cyclical assets, potentially converting them from insurance to leverage,” they argue.

Crypto, innovation or speculative bubble?

The pro-crypto could see in this analysis a return of JPMorgan to the camp of the detractors of Bitcoin. Its analysts qualify their remarks. They thus underline that “Bitcoin has already reached the strongest price appreciation ever recorded for an essential asset. ”

And this regardless of whether “cryptocurrencies are ultimately seen as a financial innovation or a speculative bubble.” »Decrypt also recalls that Normand and Manicardi have already seen it right in the past.

In 2018, they predicted that the next great financial crash would occur in 2020. However, this was due to a global health crisis that no one could predict or anticipate. The scenario of a new crypto crash therefore needs to be weighed.

Bitcoin is certainly not the only crypto-asset recording a decline in its price. The global cryptocurrency market is now approximately $ 871 billion. Bitcoin’s share is almost 64%.

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