According to the bank, digital assets are now the best alternative asset class to invest in, along with hedge funds, per multiple media reports. It said the broad selloff in risk assets this year has hurt digital assets more than other alternative assets, including private equity, real estate, and private debt.
As a result, the strategists said there could be more room for crypto to rise compared to traditional assets. “We thus replace real estate with digital assets as our preferred alternative asset class along with hedge funds,” the JPMorgan’s strategists wrote.
Alternative assets generally refer to all investment assets that are not stocks, bonds, or cash.
The note added that other alternative asset classes such as real estate could soon be hit by “lagged repricing.” However, the chances of this happening in the digital asset market are smaller since this market has already gone through what looks like a “capitulation.”
The note further said that bitcoin appears undervalued at the moment, and that USD 38,000 is a fair price for the number one cryptocurrency.
The USD 38,000 price target JPMorgan has for bitcoin represents an upside of about 30% from the current price of USD 29,250 (as of 08:30 UTC).
In February, when BTC traded above USD 40,000, the bank also said that the fair value of BTC is around USD 38,000.
Now, JPMorgan’s strategists also noted that is “crucial” for cryptoassets in general that venture capital (VC) continues to flow into the space. It added that there are few signs that funding is drying up, despite the recent collapse of Terra (LUNA).
“Thus far there is little evidence of VC funding drying up post-Terra’s collapse. Of the USD 25 billion VC funding year-to-date, almost USD 4 billion came after Terra. Our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted,” the note said.
The note was written by a group of investment strategists at the bank, including Nikolaos Panigirtzoglou. The same strategist has previously said about bitcoin that it has potential in an inflationary environment given that some investors could consider it as a better inflation hedge than gold.