The experts are not unanimous about the worth of cryptocurrency and blockchain technology. While some see it as a game-changing revolution, others don’t find anything special in the technology. According to the latest comments coming from the house of JP Morgan, the cryptocurrency and blockchain technology have yet to prove their worth, and for the time being, they don’t pose any kind of threat to the banking and financial industry; at least for the next three to five years.
The unenthusiastic comments about cryptocurrency and blockchain echo the sentiments expressed by various established financial firms which are quite skeptical about the potential of the technology. However, the JP Morgan analysts didn’t dismiss the technology completely as many others did in the past; thereby bringing some relief for all the crypto fans and blockchain enthusiasts who see these technologies as the future of the financial transactions and banking industry. The comments took the note of the year 2018 when the biggest digital coin by market capitalization, Bitcoin lost more than three-fourth of its original value, sparking widespread panic among the investors.
The analysis of JP Morgan stated that the assets like a digital coin would only make sense in the scenario where all other mediums of investment have lost the connection with the investors, be it gold, the dollar, or any other kind of reserve assets. The agency stated that such a scenario would be dystopian and extremely painful to endure. Taking the extreme examples of economic slowdown or recession, the report stated that even in such circumstances, there are other less complicated options available that economies can use for investing, transacting, and hedging rather than resorting to the cryptocurrency and blockchain technology. JP Morgan also noted that in the last six months, there had been a considerable reduction in the trading volumes executed by the financial institutions in the crypto space although the percentage share of individual transactions has gone up. This decreasing share of institutions poses a serious question for the long term sustainability of the crypto market with critics suspecting individual hegemony in the market. Among the chief suspecting parties, asset managers and pension funds are the prominent ones who have stayed away from investing in cryptocurrency; largely because of high volatility, unclear regulatory framework, and proneness to illicit usage.
More importantly, the report by JP Morgan noted that the cryptocurrency has failed to live up to the expectations even on its intended primary purpose of providing alternative payment solutions. The agency pinpointed that there is no major retail chain in the world that had started accepting the payments in the cryptocurrencies in 2018. Rather, cryptocurrencies have found some traction among the small retailers and businesses owing to their dominant control over the payment methods. Predicting the future performance of the Bitcoin which is currently trading at around $3,565, JP Morgan stated that if the bear market continues to have its way, the Bitcoin could even fall below $1,260.
On the contrary, a US-based bank struck the more optimistic note on the blockchain technology. According to the bank, this open ledger technology has the potential to drive down the cost by eliminating any kind of third-party checks while performing transaction activity within minutes. The domain of trade finance is going to be immensely benefited by the use of blockchain; however, more efforts are required to integrate private platforms for wider adoption of the technology.