Strategists at JPMorgan believe that it is more appropriate to characterize bitcoin as a “risk” asset rather than a “safe” asset. This is because of how the leading cryptocurrency, bitcoin, has behaved over the past year against equity, JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note published Friday. Since March 2020, the correlation between bitcoin and S&P500 has increased, the strategists noted. Gold’s correlation with S&P500 has also been predominantly positive. Bitcoin’s price has retreated in the past week, breaking its massive winning rally.
“Both Bitcoin and gold could be more characterized as ‘risk’ rather than ‘safe’ assets.”
Gold’s correlation with S&P500 has also been predominantly positive. Therefore, “both bitcoin and gold could be more characterized as ‘risk’ rather than ‘safe’ assets,” strategists noted, who believe investors prefer these assets because they are “alternative” options rather than safe or “hedge” assets. While bitcoin is witnessing a higher institutional and retail demand, its price return to $40,000 looks difficult in the short term, according to the strategists. This is because the pace of flows into the Grayscale Bitcoin Trust (GBTC) “appears to have peaked” based on four-week rolling averages.
It is unlikely for Bitcoin to cross above $40k given the institutional flow behind Grayscale.
“Currently, the institutional flow impulse behind the crypto lending firm Grayscale Bitcoin Trust is not strong enough for the leading cryptocurrency to break out above $40k as the 4-week pace of the flow into GBTC appears to have peaked,” said the strategists. “Thus, the risk is that momentum traders will continue to unwind bitcoin futures positions.” Earlier this month, the strategists predicted Bitcoin’s price could reach above $146,000 over the long term, provided that bitcoin’s volatility converges to that of gold.