J.P. Morgan backs Bitcoin, and expects valuation to rise by 28 percent

The company replaced real estate with cryptocurrency in its alternative assets.
Ameya Paleja
The photo credit line may appear like thiswinhorse/iStock

American multinational investment bank J.P. Morgan has backed cryptocurrencies to bounce back strongly from their downfall. In a note to investors, the firm said that Bitcoin was currently underpriced, and its valuation was expected to rise by 28 percent, Markets Insider reported

The cryptocurrency market is going through a tough phase right now. At their peak in November last year, cryptocurrencies were a $3 trillion market. In the months that have followed, crypto coins have been losing value and the recent exodus of investors from the 'risky assets' has seen the overall size of the market shrink almost by a third, to $1.3 trillion. 

What is spooking investors away from cryptocurrencies? 

The uncertainty of the pandemic saw investors park their funds in digital assets, and cryptocurrencies were the largest gainers. As the world went back to the pre-pandemic normal earlier this year, investors have found other attractive avenues for their funds. 

To counter the rising inflation, central banks have been raising interest rates around the world. Earlier this month, the U.S. Federal Reserve hiked interest rates by 50 basis points, the highest such increase in over two decades. This has fuelled fears that the U.S. economy could go into a recession in the near future, and investors want to move their investments away from risky assets like cryptocurrencies. 

The conflict in Ukraine, which now entered its fourth month, and the slowdown in China are also reasons why investors are looking for safer havens, Markets Insider reported. However, the most visible impact has been on cryptocurrencies.  

Bitcoin is down 37 percent from the beginning of the year, while the second most popular crypto coin Ethereum has dropped 48 percent of its valuation during the same period.  

J.P. Morgan is betting on cryptocurrencies more than real estate

In its note to investors, J.P. Morgan stated that the Bitcoin price was currently undervalued. The sell-off of cryptocurrencies earlier this month has seen Bitcoin tumble to the $27,000 mark. However, according to J.P. Morgan, $38,000 was a fair price for the most popular altcoin. 

Going forward, the investment firm sees an upward trajectory for Bitcoin. Even though cryptocurrencies were hit the most during the recent sell-off, J.P. Morgan saw them as assets with the most potential to bounce back as well. Backing their claim, J.P. Morgan has now replaced real estate as their preferred alternative asset with digital assets, even though it was less keen on alternative investments going ahead. An alternative asset is any asset that isn't stock, bond or cash.

Analysts at the investment firm also believe that venture capital funding will also be crucial for crypto coins as they look to make a comeback, and they continue to see VC interest in these digital assets. 

Bitcoin might just be heading for a price uptick soon. 

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