Cryptocurrencies have been struggling in 2022 as various macroeconomic issues, ranging from inflation to the Ukraine conflict, prompted a sell-off in risky assets.
Since January, the crypto market has lost over $1 trillion in value, with leading digital assets Bitcoin and Ether losing 38 percent and 48 percent, respectively. The collapse of the stablecoin TerraUSD earlier this month has added to the industry’s dismay, prompting some to wonder if we’re in the midst of a “crypto winter.”
However, this week, crypto investors are getting some much-needed help from an odd source: JPMorgan Chase.
Why JPMorgan Chase is bullish on bitcoin?
In a Wednesday note, the investment bank’s strategists, led by Nikolaos Panigirtzoglou, commented that they believe Bitcoin, the world’s most popular digital currency, has “considerable upside potential” following its recent decline.
The strategists have kept the target forecast of $ 38,000 price for Bitcoin. This indicates a potential 32 percent increase from the cryptocurrency’s current trading level of $28,684.
“In comparison to last January/February, the recent crypto market correction appears more like surrender. We see upside for Bitcoin and crypto markets, in general, going forward,” the strategists stated.
As mortgage rates rise, JPMorgan sees digital assets and hedge funds as its “preferred” alternative asset classes, with real estate being pushed to the sidelines.
However, citing persisting macroeconomic challenges, the investment bank’s analysts downgraded alternative investments to “underweight” from “overweight.”
JPMorgan Chase’s shifting stance on cryptos
Since last year, when it provided its wealth management clients access to six crypto funds, including the Grayscale Bitcoin Trust, JPMorgan has moved to become more involved in the crypto market.
The bank also announced a “strategic investment” in TRM Labs, a blockchain analysis company, in February 2022.
Despite CEO Jamie Dimon’s long history as a crypto skeptic, the company has decided to invest. In 2017, Dimon asserted that Bitcoin was a “fraud,” In October of that year, he branded the top cryptocurrency “worthless.”
Nonetheless, Dimon stated that his clients are “adults” capable of making their own choices.
“So if they want to buy Bitcoin, we can’t custody it, but we can give them legitimately, as clean as possible, access,” he stated in October at an Institute of International Finance event.
Dimon’s stance on cryptocurrencies has remained gloomy in the months following. Still, he lauded blockchain technology at the Wall Street Journal’s CEO Summit in May, saying it has been a worthwhile innovation.
On Wednesday, JPMorgan’s strategists also took a more bullish tone, claiming that, despite the recent crypto sell-off, there is no evidence that VC funding in the industry is diminishing.
To their point, Andreessen Horowitz, a venture capital firm, revealed on Wednesday that it had raised $4.5 billion for its fourth crypto fund in the hopes of profiting from the crypto bear market’s bargains.
Announcing our fourth crypto fund, totaling $4.5B, to invest in promising web3 startups at every stage. This brings our total crypto/web3 funds raised to over $7.6B.
— a16z (@a16z) May 25, 2022
Bitcoin trading at lower levels of support
After the terraUSD crash shook the bitcoin market on the 9th of March, the bitcoin crashed by more than 15% and has been trading at the lower levels of support. It has been trading in the range of $ 31,500 and $ 28,000. A breakout from the range is crucial to bouncing back to $ 38,000. It has been trading at the lower band, and chances of a breakdown are more likely.