JPMorgan: Bitcoin Successfully Passes First Stress Test In Its History
Bitcoin, like many other assets, posted a sharp decline in March as investors fled risky markets amid economic turmoil caused by the coronavirus pandemic. Bitcoin, however, emerged from this situation relatively unscathed, analysts at JPMorgan say in a new report titled “Cryptocurrency Pass First Stress Test: Digital Gold, Pyrite, Or Anything In Between?”
The fact that cryptocurrencies have successfully recovered from the March crash testifies to their “longevity as an asset class.” “The price behavior indicates their continued use as a mechanism for speculation, not a means of payment or store of value,” adds JPMorgan analyst Nikolaos Panigirtzoglou..
Bitcoin continues to show strong correlation with riskier assets such as stocks, he observes. On Thursday, for example, the cryptocurrency fell 7.8%, while the S&The P 500 experienced its deepest decline in 12 weeks. Markets recovered on Friday, and bitcoin returned to $ 9,500.
Analysts note that the relative novelty of the cryptocurrency space did not allow Bitcoin to participate in such global stress tests before, but it passed its first test “mostly positively.” At this time, Bitcoin movements were characterized by increased volatility, but the same thing happened in traditional markets, the authors of the report write..
“At the lows of the March collapse, the price of bitcoin did not deviate too much from intrinsic value. In other words, its price only for a short time fell below the cost of mining, despite the volatile jump. In addition, there were no clear signs of a flight into liquidity within the asset class. Most cryptocurrencies were falling at the same time, and this correlation has increased in recent months, “the publication says..
Moreover, the structure of the cryptocurrency market turned out to be more stable compared to the markets of foreign currencies, securities, government bonds and gold, Panigirtsoglu said. As an illustration, he points to the rapid recovery in bitcoin liquidity after the crash, which has not been the case in other asset classes..
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