Anyone around for the cryptocurrency correction in September 2017 will remember Jamie Dimon, president and CEO of JPMorgan Chase, fueling the FUD by calling bitcoin a fraud. He infamously (and regretfully) went on to state that he would “fire in a second” any JPMorgan trader caught trading bitcoin. It seems that the bank has decided to do some research and is now presenting a slightly different viewpoint on the topic of cryptocurrencies.
A report by JPMorgan Chase’s Global Research Unit, obtained by Coindesk, entitled “Decrypting Cryptocurrencies: Technology, Applications and Challenges” has suggested that cryptocurrencies could one day help investors diversify their equity and bond portfolios.
“If past returns, volatilities and correlations persist, [cryptocurrencies] could potentially have a role in diversifying one’s global bond and equity portfolio. But in our view, that is a big if given the astronomic returns and volatilities of the past few years.”
The report discusses various topics that touch on the implications that cryptocurrencies and blockchain will have on financial firms, central banks and investors.
“If [cryptocurrencies] survive the next few years and remain part of the global market, then they will likely have exited their current speculative phase and would then have more normal returns, volatilities (both much lower) and correlations (more like that of other zero-return assets such as gold and JPY).”
Blockchain technology was acknowledged as early as 2016 by JPMorgan’s research unit, as credible technology that had the ability to create “opportunities for asset managers and the potential to change the way they do business”.
In October 2017, a month after Dimon’s damning bitcoin comments, the bank then continued to announce the launch of a blockchain-based system that will “significantly reduce” the number of parties needed to verify global payments, reducing transaction times “from weeks to hours”.
The future and potential of blockchain technology has never been something that JPMorgan has disputed. However, this is the first time that they have acknowledged cryptocurrencies as potential investment instruments.
The report goes on to discuss blockchain technology and the disruption it will cause to the financial services industry, as well as discussing a “Fedcoin” or cryptocurrency generated by a central bank.
For now, cryptocurrency investors can rest easy in the assurance that cryptocurrencies are not going anywhere soon. And even JPMorgan seems to agree.
“[Cryptocurrencies] are unlikely to disappear completely and could easily survive in varying forms and shapes among players who desire greater decentralization, peer-to-peer networks and anonymity, even as the latter is under threat.”
It will interesting to watch banks such as JPMorgan as the cryptocurrency space evolves. With the adoption of blockchain and research of cryptocurrencies underway, who knows what may be next?