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JPMorgan Drops Real Estate for Crypto; Says Bitcoin Trading at 30% Discount

2 mins
Updated by Geraint Price
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In Brief

  • Cryptocurrency assets have replaced real estate as a preferred asset class, says JPMorgan.
  • The bank said bitcoin's fair value is $38,000, meaning it is currently undervalued by about 30%.
  • JPMorgan has started to offer crypto services despite CEO Jamie Dimon's harsh criticism of bitcoin.
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Cryptocurrency assets – and hedge funds – have replaced real estate as the preferred asset classes, according to a group of strategists at U.S. investment bank JPMorgan Chase & Co.

In an investment report, the strategists, led by Nikolaos Panigirtzoglou, also said that bitcoin (BTC) was trading at a discount of up to 30%.

“While public markets already price in significant recession risks, and digital assets have repriced significantly following the collapse of TerraUSD (UST), some alternative assets such as private equity, private debt and real estate appear to have lagged somewhat,” it said.

“We thus replace real estate with digital assets as our preferred alternative asset class.”

However, the bank’s strategists downgraded alternative investments – those type of assets outside of stocks, bonds or cash – to “underweight” from “overweight,” citing the continuing macro-economic difficulties.

JPMorgan expects returns from alternative assets such as cryptocurrency to come in at 10% over the next year. That compares with a return of 12% for traditional assets.

Bitcoin 30% undervalued, says JPMorgan

Although the market was still reeling from the recent sell-off, Panigirtzoglou and his team are confident bitcoin will soon rally.

The strategists maintained that bitcoin’s fair value is $38,000, based on its volatility ratio to gold. This means that at the current price of around $29,600, BTC is trading at a discount of nearly 30%. They said:

“The past month’s crypto market correction looks more like capitulation relative to last Jan/Feb, and going forward, we see upside for bitcoin and crypto markets more generally.”

JPMorgan’s strategists sounded bullish on the future of the crypto industry, just as long as venture capital funding kept flowing. They stated that “the trajectory for VC funding would be crucial in helping the crypto market to avoid the long winter of 2018/2019.”

To their point, venture capital firm Andreessen Horowitz announced that it would inject $4.5 billion into crypto startups to capitalize on the market downturn.

JPMorgan CEO criticizes crypto

JPMorgan has started to offer crypto services to its customers despite CEO Jamie Dimon’s harsh criticism of bitcoin.

In 2017, Dimon attacked bitcoin, calling it a “fraud.” He doubled down on the criticism last Oct, and said the digital asset was “worthless.” But he decided to let his clients make up their own minds because they were “adults.”

“So if they want to have access to buy bitcoin, we can’t custody it, but we can give them legitimate, as clean as possible, access,” Dimon said at the time.

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Jeffrey Gogo
Jeffrey Gogo is a Zimbabwean financial journalist with more than 18 years of experience covering local and global financial markets; economic and company news. A climate change enthusiast, Gogo first encountered bitcoin in 2014 and began covering crypto markets in 2017.
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