Jamie Dimon And JPMorgan Chase Send Conflicting Signals On Cryptocurrencies
Andy Hecht | Jun 06, 2022 04:56AM ET
This article was written exclusively for Investing.com
- Dimon has not been shy about his view of cryptocurrencies
- JPMorgan Chase makes Bitcoin a “preferred asset” with the potential for a 30% appreciation
- JPM likes cryptos more than real estate
- Hedging bets by the leading US bank
- Bearish crypto trend continues, but JPM recommendation could lead to significant bounce
After substantial rallies in 2020 and 2021, Bitcoin along with other cryptocurrencies have had a rough time in 2022. The asset class’s market cap rose to over $3 trillion in November 2021 and had fallen below the $1.23 trillion level as of June 3.
Many crypto supporters believe that the burgeoning asset class will replace gold in the global financial system. However, the trend over the past six months shows that the luster of cryptos has tarnished.
The digital currency asset class continues to have its detractors, individuals who believe the tokens are worthless, and the appreciation over the past years has been an event not witnessed since the tulip bulb mania seen in the Netherlands in the 1600s. One high-profile critic, businessman and CEO of JPMorgan Chase, Jamie Dimon, even compared cryptos to tulip bulbs in a comment he made in 2017. Since then he's had additional negative things to say about the asset class.
Last week, the financial institution he leads recommended cryptocurrencies for investors, creating a mixed signal for the market and JPM customers.
h2 Dimon has not been shy about his view of cryptocurrencies/h2Dimon has led JP Morgan Chase since 2005. Five years after he took over, Bitcoin began trading at five cents per token.
During his tenure as CEO, Dimon hasn't held back on his opinion of Bitcoin and cryptocurrencies:
- In 2017, he called Bitcoin a “ ” that would eventually blow up.
- In 2017, he compared Bitcoin to the tulip bulb mania that gripped the Netherlands in the 1600s.
- In 2017, he said he would fire any employee trading Bitcoin for being “ ”.
- In October 2021, he said Bitcoin is “ ”.
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Clearly, Dimon, the head of one of the world’s leading financial institutions, is no fan of Bitcoin and cryptocurrencies.
JPM makes Bitcoin a “preferred asset” with the potential for a 30% appreciation
In JP Morgan analysts wrote :
“The past month’s crypto correction looks more like capitulation relative to last January/February and going forward, we see upside for Bitcoin and crypto markets more generally.”
The bank’s price target for Bitcoin is $38,000, with Bitcoin sitting around the $31,000 level currently. On May 25, when the recommendation was released, June Bitcoin futures were just below $30,000, as the bank forecast a 30% rise in the leading cryptocurrency, making it a “preferred asset”.
h2 JPM likes cryptos more than real estate/h2The JP Morgan report detailed the changing investment landscape, with the bank saying:
“We thus replace real estate with digital assets as our preferred asset class along with hedge funds.”
JP Morgan currently believes that assets that rely on bids and offers for tokens that sit in cyberspace now have more upside potential than brick and mortar real estate holdings.
Meaning, the bank’s analysts are selling the market that experienced incredible appreciation over the past years, exchanging it for cryptos that have been in a bearish trend since the November 2021 record high. Bitcoin has lost over 56.7% of its value since the late 2021 high.
Source: Barchart
The chart above shows the decline from $68,906.48 on Nov. 10, 2021, to the $29,820.85 level on June 3, 2022.
h2 Hedging bets by the leading US bank/h2Last week, when Dimon warned investors to “ ” for an economic hurricane, he didn't mention cryptocurrencies. Citing rising interest rates and the war in Ukraine, he said he's ramping up his warnings for the most prominent US bank, “You know, I said there’s storm clouds, but I’m going to change it…it’s a hurricane.”
Rather the plain-spoken CEO criticized the US Federal Reserve saying quantitative easing programs “backfired”, calling negative real interest rates a “huge mistake”.
He also warned that the US is not protecting Europe from rising oil prices. Nearby NYMEX crude oil prices were above the $118 per barrel level at the end of last week and they're even higher today.
While Dimon did not expressly shift his view of cryptos, his frustration with the US central bank, US energy policy, and other social, economic, and geopolitical issues indicate that it's possible he's changed his opinion of the ideological underpinnings that gave birth to the blockchain revolution and cryptocurrency evolution.
Cryptos are libertarian and reject the influence of governments and central banks so that the value of digital tokens is only a function of buying and selling in the markets. While Dimon remained silent on the burgeoning asset class, his passionate comments that included occasional profanity and dire economic forecasts based on policy errors could be a sign that he has come around to appreciate some of the reasons why Bitcoin and the other nearly 20,000 cryptocurrencies exist.
h2 Bearish crypto trend continues, but JPM recommendation could lead to significant bounce /h2With Bitcoin sitting around 56.7% below its all-time high, the bearish trend that began with a downside key reversal trading pattern on the daily chart in Bitcoin, Ethereum, and other cryptos on Nov. 10 continues in early June. However, the recent price action could mean that Bitcoin is forming a base that could become a launchpad for the upside.
Source: Barchart
Since May 13, Bitcoin has been sitting in a range between $28,000 and $32,000 per token. JP Morgan’s forecast could cause the buying that will lift the tokens to the $38,000 level. Meanwhile, the critical technical resistance levels stand at just below $43,000, the late April 2022 high, and around $48,200, the late March peak. A move above $48,200 would end the bearish trend that has gripped Bitcoin since the Nov. 10 high.
While JP Morgan Chase and its CEO are sending the crypto market conflicting signals, Dimon’s latest comments could signify that he's coming around to the ideological reasoning that embraces the digital asset class.
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