Forget bitcoin: fintech is the ‘true story of Covid-19’, says JPMorgan


A woman uses a Bitcoin ATM placed inside a security cage on January 29, 2021 in Barcelona, ​​Spain.

Cesc Maymo | fake images

Bitcoin is an “economic spectacle” and fintech innovation is the story that will dominate financial services, according to JPMorgan.

The bank’s analysts said that despite bitcoin’s monstrous rally, the cryptocurrency is still beset by a number of issues that may prevent it from becoming a major asset.

“Bitcoin prices have continued their meteoric rise with Tesla, BNY Mellon and Mastercard announcements of increased acceptance of cryptocurrencies,” JPMorgan said in a research note last week.

“But fintech innovation and increased demand for digital services are the true story of Covid-19 with the rise of online startups and the expansion of digital platforms for credit and payments.”

Bitcoin has gained traction with the major Wall Street banks and the Fortune 500 companies, a development that has increased its price and saw it hit $ 1 trillion in market value last week.

Investors have made comparisons between bitcoin and gold, seeing the former as a new digital store of value thanks to its limited supply – the total number of bitcoins that will ever exist is capped at 21 million.

JPMorgan’s own strategists say that bitcoin could climb as high as $ 146,000 as it competes with gold as a possible hedge against inflation in the coronavirus crisis.

Still, skeptics remain unconvinced. Economists like Nouriel Roubini say that bitcoin and other cryptocurrencies have no intrinsic value. And a recent Deutsche Bank poll said investors view Bitcoin as the most extreme bubble in financial markets.

Digital gold?

JPMorgan strategists said that current bitcoin prices appear to be “unsustainable” unless the cryptocurrency becomes less volatile. They added that their $ 146,000 price target depended on bitcoin’s volatility “converging to gold,” which would likely take years to happen.

Meanwhile, cryptocurrencies have “questionable diversification benefits” and are ranked as the “poorest hedge” against significant drops in share prices, analysts at JPMorgan said.

JPMorgan has been advancing blockchain technology with its own cryptocurrency called JPM Coin and a new business unit called Onyx.

The rise of digital finance and the demand for fintech alternatives is the “true financial transformation story of the Covid-19 era,” according to JPMorgan.

“Competition between banks and fintechs is intensifying, and big tech owns the most powerful digital platforms due to their access to customer data,” the bank said.

“The ‘cooperation’ between the ‘Fin’ and ‘Tech’ players is yet to come, with banks increasing investment to bridge the technology gap, and the battle between US banks and non-bank fintech is also playing out on the front lines. regulatory “.

Major tech companies like Apple and Google have shown increased interest in financial services lately. Apple launched its own credit card in partnership with Goldman Sachs, while Google is allowing its users to open checking accounts following an alliance with Citigroup.

“Traditional banks could emerge as final winners in the digital banking era due to their advantage of deposit franchising, risk management and regulation,” said JPMorgan.

Digital banking has boomed in the era of the coronavirus, with both large lenders and fintechs seeing a surge in adoption as people spend more time at home due to public health restrictions.

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