Digital assets have replaced real estate as the preferred alternative asset class, the bank said in its alternative asset outlook and strategy paper.
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- "While significant recession risks are already priced into public markets and digital assets have gained significantly in value following the collapse of Terra USD, some alternative assets such as private equity, private debt and real estate appear to be lagging somewhat," JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note to clients Wednesday. "We are therefore replacing real estate with digital assets as our preferred alternative asset class."
- As for alternative assets as a whole, the team downgrades the position from overweight to underweight and expects traditional assets to return 12% next year, while alternative assets will only return 10%.
- Looking at cryptocurrencies, they say the collapse of Terra has depressed sentiment in the sector, providing a "good entry point" for longer-term investors. The key to avoiding a "long winter" similar to 2018/2019, they say, is venture capital funding, and so far there is little sign that this has dried up.
- In addition, they noted that there has not been much impact on other stablecoins and the overall value of DeFi projects has been "relatively resilient" without Terra.
- The recent downward moves in Bitcoin (BTC) and the broader crypto market "feel like a capitulation," Panigirtzoglou and colleagues said. Based on the volatility ratio between bitcoin and gold, they estimate the fair value of the most popular cryptocurrency at $38,000, nearly 30% above its current price.