Despite the fact that bitcoin’s market value topped $1 trillion for the first time last week, and the cryptocurrency is up 94% year-to-date, JPMorgan thinks that digital banking--not crypto--will be the biggest beneficiary of the pandemic.
Crypto is just a side hustle, so to speak.
“…fintech innovation and increased demand for digital services are the real Covid-19 story with the rise of online start-ups and expansion of digital platforms into credit and payments.”
According to a recent McKinsey survey, the pandemic accelerated the growth of fintech and “neobanks” to the point that traditional banking should be feeling the heat of intense disruption.
“Forty-two percent of respondents surveyed last year said they use at least one fintech with six of them becoming a fintech user since the start of the pandemic,” the survey says.
The survey found that all fintech segments from payments and investments to lending and general banking have grown since the crisis began. In fact, more than 24% percent of consumers now use a fintech banking platform, making it the most-used of the four types.
In its previous “New picture of finance” report, McKinsey estimated that by 2025 up to 40% of the collective revenue of banks could be stolen by fintech
Another survey, commissioned by Plaid, found that some 80% of Americans now say they can manage their finances without a physical bank branch. The survey found that 67% plan to continue managing most of their finances digitally after COVID.
During the pandemic, Generation Z and millennial customers had the most fintech accounts. Even more shockingly, more than a quarter of baby boomers (aged 56-74) said they relied on a fintech account.
In the same note it released on fintech, JPMorgan said that cryptocurrency was still burdened by several issues that may prevent it from becoming a mainstream asset, not the least of which is its volatility, which is still an issue even though it is nowhere near what it used to be.
Still, last month JPMorgan also published a note saying that bitcoin could soar to $146,000 as it competes with gold as an “alternative” currency as a potential hedge against inflation in the coronavirus crisis.
However, bitcoin will have to meet certain conditions if it wants to match gold in terms of market value.
The cryptocurrency will need to become substantially less volatile--and more in line with gold’s level of volatility.
Earlier this month, Investment firm Guggenheim Partners also drew comparisons between bitcoin and gold and released its new prediction for bitcoin’s long-term price potential at $600,000.
“If you consider the supply of bitcoin relative … to the supply of gold in the world, and what the total value of gold is, if bitcoin were to go to those kinds of numbers, you’d be talking about $400,000 to $600,000 per bitcoin,” Scott Minerd, chief investment officer told CNN.
A $600,000 price tag would render bitcoin's total value around $12 trillion, which would match the world's gold market.
The recent surge in bitcoin to record levels was in part driven by the entry of larger, institutional investors into the market.
In the latest, Tesla, the world's most valuable carmaker, revealed its new strategy in a filing with the U.S. Securities and Exchange Commission, saying that in January it invested $1.5 billion in Bitcoin.
Since then, analysts calculated that the company made just under $1 billion in paper profits from it.
Daniel Ives, an analyst at Wedbush Securities wrote in the note that Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its cars in all of 2020.
“While the Bitcoin investment is a sideshow for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Ives wrote in the note.
Tesla is now the biggest Bitcoin buyer after business analytics firm MicroStrategy which has also bought more than $1.5 billion in bitcoin.
In late October, payments company Square said it bought 4,709 bitcoins, worth approximately $50 million, while PayPal secured the first conditional cryptocurrency license from the New York State Department of Financial Services
By Josh Owens for Safehaven.com