Bitcoin has become an asset like any other with its correlation, and is likely to stay that way according to a JP Morgan analyst. Bitcoin has had a rather interesting trajectory since it became a favourable trading asset, but does that mean it is consigned to this role for the rest of time?
Bitcoin certainly has moved away from what it was outlined to be in the original whitepaper — a digital cash system — and it has become far more of a digital gold. This has also been propelled by the interest that has come from individual ‘hodlers’, retail investors as well as the burgeoning institutional investor space.
However, Bitcoin, and especially blockchain, has been predestined for much greater things with its potential disruptive capabilities — but does this really extend to Bitcoin, or is this rather something for the next generations of cryptos and blockchain?
More of a stock
In a note to investor clients obtained by CoinDesk, JPMorgan Chase & Co. analysts described how Bitcoin has shifted from a fairly uncorrelated asset to one whose price more closely tracks traditional stocks.
“Though correlations were modest and mostly mean-reverting around zero for much of the past couple of years, in recent months they have moved sharply higher in some cases (equities) and lower in others (U.S. dollar, gold),” wrote the team of strategists led by Joshua Younger.
Bitcoin also struggled when it came to pulling off its safe haven narrative in the recent market crash. Many have highlighted its potential to be anti-correlated, but this does not appear to be the case currently.
While the market structure for crypto during this period was more resilient than its traditional counterparts, according to the report, bitcoin did not quite live up to its reputation in some corners as a port in a storm.
“There is little evidence that Bitcoin and others served as a safe haven (i.e., ‘digital gold’)—rather, its value appears to have been highly correlated with risky assets like equities,” the report concluded. “This all likely points to the continued survival of the asset class, but likely still more as a vehicle for speculation than as a medium of exchange or store of value.”
Only way to go?
Perhaps Bitcoin is destined to continue being a speculative investment, and this may well be the first use case that can be appreciated for the original, and frankly, quite basic, blockchain tool. Bitcoin is financial in nature, and fits in this deeper space of speculative investment.
This does open the door for other cryptos, like programmable smart contract ones, to try and take the technology further and distance themselves from the financial and speculative side of things.