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JPMorgan’s Cryptic Change Of Heart

Bitcoin

After years of bemoaning bitcoin, JP Morgan is now singing a very different digital tune--possibly because now that BlackRock seems to have overtaken things on Wall Street with its ESG investing, JP Morgan needs its own trick, and one that Goldman Sachs isn’t planning itself. 

That leaves bitcoin. 

Once upon a time--not too long ago--JP Morgan’s mantra was that bitcoin was nothing but a “fraud”. 

As of June 2020, though, the giant bank is calling bitcoin “mostly positive”, and cryptocurrencies in general an asset class with “longevity”. 

According to bank strategists, “price action points to their continued use more as a vehicle for speculation than medium of exchange or store of value”. 

In other words, JPMorgan has performed a bitcoin about-face, but is trying to make it look like it’s purely speculative. But isn’t everything, ultimately?

JP Morgan vs Goldman

Now they each have a niche, while BlackRock pumps sustainable stocks. Goldman Sachs has the anti-bitcoin niche and JPMorgan has the crypto turnaround. 

Goldman Sachs as of late May was still firmly holding on to its description of bitcoin as “not an asset class” and “not suitable for investment”. Goldman insists that there is no evidence that bitcoin is a hedge against inflation. 

Right before Goldman delivered its most recent bitcoin “ruling”, JPMorgan added Coinbase as its first crypto-exchange customer, definitively jumping into this game. 

"Though the [bitcoin] bubble collapsed as dramatically as it inflated, bitcoin has rarely traded below the cost of production, including the very disorderly conditions that prevailed in March," JPMorgan analysts said in a report. 

The timing is important. 

In March, bitcoin plunged to under $4,000--for a short spell--when the coronavirus pandemic took hold of the world. 

But since then, it’s gained all of that back and has tested the $10,000 range frequently. 

On May 12th, bitcoin underwent its third halving, setting in motion a supply squeeze. 

But bitcoin’s unusually low volatility for the past few weeks has some traders suggesting that it’s time for a major price move

From JPMorgan’s perspective, March was the real stress test for bitcoin. When the pandemic was crushing everything, the bank noted there was little sign of a flight to liquidity and the crypto market structure was “more resilient” than forex, equities, treasuries and even gold. 

At this point, Bitcoin market depth is above its 1-year trailing average, while liquidity in more traditional asset classes has yet to recover,” said the strategists, as reported by The Block Crypto. 

As of the time of writing on Monday, June 15th, bitcoin was settling around $9,425--still not able to sustain anything above $10,000 for long, but also steady in its range for weeks with the exception of an early morning sell-off today from which it bounced back.

For the first time since the month of May, this morning bitcoin slid below $9,000 temporarily, shedding just over 5% at one point, and below its 50-day moving average. The selloff, however, was short-lived. 

Whether JPMorgan or Goldman Sachs wins this game, though, is anyone’s guess. Predictions are just as cryptic as the digital currencies themselves. Bitcoin halvings have traditionally led to higher bitcoin prices--eventually, not immediately. 

In 2016, the halving initially saw bitcoin plunge from $1,100 to $600. It was only a year after this that it started to surge, eventually peaking at $19,783 in December 2018. In other words, playing the halving game requires patience. 

By Michael Kern for Safehaven.com 

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