JP Morgan, one of the largest banks in the United States has changed its view on Bitcoin.
Last month they opened up accounts for Bitcoin traders and in a new report titled “Cryptocurrency takes its first stress: Digital gold, pyrite, or something in between?” their analyst state Bitcoin looks “mostly positive” after the pandemic-induced stock market collapse. That is a long way from their original position, where they labeled Bitcoin a fraud. Back in September 2017, JP Morgan chief executive Jamie Dimon said he would fire employees who were caught trading Bitcoin because it was both stupid and against the company rules.
Bitcoin once again proved its resilience as the cryptocurrency recouped its losses faster than most assets including fiat currencies, stocks, Treasuries and gold. By May and early June, Bitcoin was back trading to its pre-Covid19 crash levels, and it is now again testing resistance levels at $10,000.
The report examines bitcoin, cryptocurrencies, and other financial assets as they plunged in March when the Covid19 pandemic hitting in the U.S. and the rest of the world, causing shutdowns that crippled the economy. Even while bitcoin crashed below $4,000, it bounced back faster than most other assets and recouped most of its value by the end of April.
Furthermore, the report describes that there were few signs of a flight to liquidity within the asset class, as most cryptocurrencies collectively fell in March. Concluding that bitcoin weathered its stress test well, the strategists wrote: “there is little evidence of run dynamics, or even material quality tiering among cryptocurrencies, even during the throws of the crisis in March.”
The report also explores “liquidity, or the bid-offer spread of the order book, which is directly related to volatility. When the order book thins, a given transaction could result in a larger price change, and vice versa,” the news outlet conveyed. “Though bitcoin saw among the most severe drops in liquidity around the peak of the crisis, that disruption unwound itself much faster than other asset classes.” According to the publication, the strategists wrote:
The final conclusion was that the Bitcoin’s market structure turned out to be more resilient than those of currencies, equities, Treasuries and gold.
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