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JPMorgan Reveals Market is Highly Anticipating the Launch of CME Bitcoin Options

According to JPMorgan Chase & Co, Institutional interest in Bitcoin-related contracts appears to be building, and they believe the market is in high anticipation of the CME Group Inc. options, which are to be launched on Jan. 13.Recently we have seen institutions such as Bakkt, subsidiary of the New York Stock Exchange and its parent Intercontinental Exchange Inc., start offering options last month but according to strategist Nikolaos Panigirtzoglou in a note on Jan 10., volumes and open interest haven’t met the expected mark. However he expects with the dominance of CME in trading Bitcoin futures on regulated exchanges, this new offering may change things, as reported by Bloomberg.

“There has been a step increase in the activity of the underlying CME futures contract.” Panigirtzoglou had noted in his writing that open interest had seen a 69% increase from the end of the year and that the number of large interest holders had increased. “This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”

The price of Bitcoin has always caused the price movement of Bitcoin to have a mixed reaction. There were times it had appeared to have dragged, such as when ICE announced the debut of its new futures contracts in September. And the price climaxed to $19000 in December 2017 following the launch of the futures for CME and Cboe Global Markets Inc.

The price of Bitcoin saw a 2.1% increase to $8,209.42 as of 11 a.m. in Hong Kong, according to Bitstamp pricing: this was near its highest levels since mid-November. According to the report, the intrinsic value of Bitcoin has been on the increase but remains below the market price. JPMorgan calculates the intrinsic value of Bitcoin by treating it as a commodity, considerations such as the marginal cost of production, the computational power and the cost of electricity used are key elements.

Panigirtzoglou stated in his writing, “The market price has declined by nearly 40% from its peak while the intrinsic value has risen by around 10%,”. But that “the gap has not yet fully closed, suggesting some downside risk remains.”

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Actinver, BNP Paribas, Citibank, And JPMorgan Go Live on CLS Blockchain Platform

CLS bank, a global foreign exchange settlement giant, has announced that four banks (JPMorgan, Citibank, BNP Paribas, and Actinver) are live on its CLSNet platform, a blockchain-based payment netting service.

CLSNet solution is an automated, standardized bilateral payment netting service for more than 120 currencies operating on a DLT (distributed ledger technology) platform. CLS launched the service in November 2018, with Morgan Stanley and Goldman Sachs as its first customers.

The four major banks will join Morgan Stanley, Bank of China, Bank of America, Goldman Sachs, and Intesa Sanpaolo as part of the first nine market participants to leverage the CLSNet platform, with many others expected to join the service over the coming year.

Alan Marquard, Chief Business Development Officer, CLS said: “The addition of these latest market participants testifies the value that CLSNet is offering to the foreign exchange market. The service continues gaining flow and participants and is efficiently operating. We will continue investing in the resilience and growth of the service and have a roadmap of enhancements, which will further expand the value proposition to clients.”

Mike Lawrence, Chief Administrative Officer, Citibank added: “We are happy to be a participant of the CLSNet solution. CLSNet provides high-quality industry standardization to previously inefficient and fragmented bilateral netting models. It will enable wider access to settlement netting as a risk mitigation enabler at an industry level while offering important operational efficiencies as the network builds.”

Brian Gallagher, Market Operations, Managing Director, JPMorgan, stated: “CLSNet will deliver efficiencies in the foreign exchange settlement for non-CLS transactions and offer other significant benefits to our foreign exchange business.”

Joe Nash, Chief Operating Officer, BNP Paribas, said: “We aim to see valuable benefits to BNP Paribas in terms of reduced operational processes and related risks and also support for business growth in the trading of non-core currencies.”

Hector Sanchez, Head of Operations, Actinver, also commented: “CLSNet technology will enable us to address our broader post-trade processing needs and enhance our operational efficiency by reducing risk, enabling real-time awareness of currency and counterparty exposures.”

Most institutions normally net with one another on a regular basis. However, the process frequently requires manual interventions and is not fully scalable. Limited payment netting also is worsened by high settlement costs in emerging market currencies in spite of their increased relevance for foreign exchange firms.

CLSNet was developed in collaboration with sell-side and buy-side institutions. It aims to standardize and enhance the levels of payment netting in the foreign exchange market so that to enable improvements to intraday liquidity, increased risk mitigation, and greater operational efficiency for non-CLS settled currencies, which are mostly in emerging markets that are growing more rapidly than those in current CLS jurisdictions.

CLSNet can be used directly by non-CLS banks and the buy-side firms, thus enabling a broader group of market participants to benefit from reduced operational costs and risk the service delivers.

CLSNet solution was developed in partnership with IBM and is based on the Hyperledger Fabric blockchain.

It has been a busy period for JP Morgan and Citi on the blockchain front. This week, JP Morgan announced its intention to merge its blockchain unit Quorum with ConsenSys. Last week, Citi and Goldman Sachs conducted the first equity swap on Axoni blockchain.

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JP Morgan Chase to Pay $2.5 Million to Settle Class Action Lawsuit Over Wrongfully Incurred Crypto Charges

JPMorgan Chase has settled a lawsuit over unannounced changes made to the fee structure applied to crypto transactions using its credit cards in 2018.

The American bank agreed to pay $2.5 million to settle a class-action lawsuit regarding its decision made in 2018 to treat cryptocurrency purchases with Chase credit cards as cash advances, ensuing in higher fees. However, JPMorgan is not admitting to any wrong-doing as part of the deal.

Brady Tucker, the plaintiff represented by Finkelstein and Krinsk LLP, said that JPMorgan Chase incorrectly charged him $143.30 in fees and $20.61 in interest from purchases he made on his Chase card in January and February. The lawsuit was originally filed in April 2018. The bank had a dismissal of the case in July in the same year, and Tucker later amended the complaint alongside Ryan Hilton and Stanton Smith.

The plaintiffs received full refunds of all of the charges wrongfully incurred, addition to $1 million in statutory damages.

However, a new motion was filed on May 26 in Manhattan federal court in the United States, and the plaintiffs said that a settlement would result in members of the class action getting around 95 percent of the fees they were unlawfully charged.

JPMorgan approves of Coinbase and Gemini

JPMorgan Chase has set the ball rolling by accepting crypto exchanges Gemini and Coinbase as banking customers. The bank gave Coinbase and Gemini accounts the green light in April, and the bank is offering cash-management services to the exchanges, as well as dealing with dollar-based transactions for their US-based clients.

The bank will also be using the automated clearing house to process withdrawals, deposits, and wire transfers. This development will allow handling transactions to be more efficient as most of the Gemini and Coinbase customers link their traditional banking accounts to those provided by the crypto exchanges. However, the JPMorgan will not be carrying out any crypto-based transactions

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JPMorgan and CNBC Jim Cramer Predict S&P 500 to Rally to New Highs, Bullish Bitcoin Trend to be Expected

JPMorgan predicts that equities could rally 47% from here, after its 40% rebound from its lows in March, hinting at a possible Bitcoin bull run. Strategists at JPMorgan recently suggested that Bitcoin successfully passed its “first stress test” during March’s global economic turmoil.

Bitcoin bull and CEO of an investment firm Dan Tapiero presented a note, quoting that JPMorgan analysts used equity position metrics to look at valuations of equities by checking the size of the bond and cash “universe.”

With the global economy deteriorating, the US has put a $2 trillion stimulus package in play with the belief that they can endlessly print more cash. The market jumped around 3% this week on the announcement that the Federal Reserve would buy corporate bonds to support the economy’s recovery from the coronavirus lockdown.

With the amount of cash in the system increasing due to central-bank buying, equities are yet to find itself in the spotlight. The report added:

“With some of the previous pockets of overextension clearing, we believe than an overall favorable equity positions backdrop will re-assert itself rejuvenating the equity bull market.”

JPMorgan analysts believe that there is “plenty of upside for equities over the medium to longer term.”

Tapiero suggested that this could be a signal for an upcoming bullish trend for Bitcoin price and gold, due to the fact that some excess cash in the investor’s reserves could go into gold and Bitcoin instead of its traditional counterparts, including equities.

CNBC host Jim Cramer analyzed a chart analysis from market strategist Carley Garner regarding the possibility for the S&P to break through its record high of 3,400 when the US recovers from the coronavirus pandemic. Cramer said:

Source: CNBC

“The chart suggests that new highs could be on the table. I think Garner makes a persuasive case, just don’t get too comfortable. If the S&P 500 really does surge to 3,400, up 9.1% from these levels, maybe take something off the table,” indicating the selling of stocks to protect the gains.

Bitcoin’s first stress test

JPMorgan has been known to be a Bitcoin critic, but recently changed its tone towards Bitcoin after strategists at the bank said Bitcoin rarely deviated from its intrinsic value or mining cost in the past few months.

Bitcoin price proved its resilience as it outperformed other traditional assets, including forex, equities, treasuries, and gold, according to JPMorgan. Bitcoin’s recovery was much faster than the other asset classes, seeing as traditional asset classes have yet to recover. The strategists added:

“That cryptocurrencies largely survived the stresses of March point to longevity as an asset class, but price action points to their continued use more as a vehicle for speculation than a medium of exchange or store of value.”

JPMorgan Expects the S&P 500 to Rally, Will Bitcoin Follow?

JPMorgan is predicting a 10 percent rally for the S&P 500, and that the industrial and construction material stocks will be the benefiting sectors of the US markets next year.

Grace Peters, head of equities strategy at the wealth management arm of the JPMorgan Private Bank, said that investors should be adding cyclical exposure to their investment portfolios during the economic recovery after the coronavirus pandemic.

JPMorgan expects that the S&P 500 would rise to between 3,500 and 3,600 by the end of 2020, and 3,750 by this time next year, a 10 percent growth from its recent close at 3,352.

Peters added that the upcoming US presidential election would be unlikely to drive share prices in the longer term, based on analysis of elections in the past. According to JPMorgan’s analysis of markets during the years of US elections dating back to the 1930s, whether President Donald Trump or Democratic nominee Joe Biden would win would “unlikely to materially drive share prices.”

Although the S&P 500 is expected to rise, according to JPMorgan, Bitcoin has been showing signs of weakness lately. Bitcoin is trading at $10,692 at press time, and has been trading sideways for nearly a week. Bitcoin has struggled to move past $11,000 for some time.

The world’s largest cryptocurrency’s network’s health has been in decline over the past week. According to crypto analytics firm Glassnode, there has been a lack of new entrants to the Bitcoin network, and BTC’s adoption among new users and investors have not grown much either.

Bitcoin’s network growth has dropped from a score of 74 to 64 points over the past week, a decrease of 13.5 percent. Glassnode explained:

“Network Health dropped from a score of 74 to 64 points over Week 39, decreasing by 13.5%. The network growth subcategory lost 8 points due to a decline in the number of new users joining the Bitcoin network. Meanwhile, network activity dropped by 10 points as the number of BTC transactions also fell.”

Glassnode also added that on-chain transactional liquidity has been growing, while trading liquidity also decreased due to lower exchange deposits.

Bitcoin has shown a correlation with the S&P 500, although there seems to be a decoupling with BTC and the stock market. Willy Woo predicted that Bitcoin (BTC) will soon decouple from the stock market, if the stock market crashes. In this case, if the S&P 500 were to rise, perhaps Bitcoin would still be able to see more growth.

JPMorgan: Bitcoin Price to See Long-Term Upside Trend due to One Important Component

Bitcoin has been witnessing a massive upward trend, taking it to over $13,000 in the past few days. JPMorgan has made several comments on the world’s largest cryptocurrency in the past year, and its stance on Bitcoin (BTC) has since changed.

JPMorgan believes that Bitcoin would have a good chance of increasing its price, according to a recent report. The investment bank said that the digital currency could continue to surge as it competes with gold as an “alternative” currency.

Bitcoin’s price has increased more than 70 percent this year, following bullish announcements including payment giant PayPal allowing its users to buy, sell, and exchange Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.

JPMorgan recently said that investors could switch from gold to Bitcoin to diversify their portfolio to have another uncorrelated storage of value. This could benefit those who do not want to solely depend on gold to diversify their risk exposure.

JPMorgan’s report also highlighted that the adoption of the cryptocurrency is also vital for Bitcoin’s price and that it is necessary to observe a more significant number of “economic agents” when predicting the future of the cryptocurrency.

Apart from PayPal’s move on Bitcoin, other institutions including MicroStrategy, Square, and Stone Ridge Asset Management have all invested in Bitcoin, some even noted that BTC has become part of its treasury investment strategy.

When comparing gold to Bitcoin, JPMorgan noted that the physical gold market, including gold ETFs, is worth $2.6 trillion. Bitcoin would need to surge at least 10 times from its current levels to catch up to gold in terms of market value. JPMorgan added:

“Even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the Bitcoin price.”

JPMorgan also explained that Bitcoin could be held for other reasons rather than just a store of value like gold. JPMorgan said:

“Cryptocurrencies derive value not only because they serve as stores of wealth but also due to their utility as a means of payment. The more economic agents accept cryptocurrencies as a means of payment in the future, the higher their utility and value.”

According to a previous survey, Bitcoin is favored by millennials rather than older investors, as they tend to turn to physical gold. While millennials are favoring Bitcoin, JPMorgan concluded that this cohort over time would become an important component of investors’ universe, giving more long-term potential upside for Bitcoin.

While Bitcoin has sustained above its previous resistance level at $12,000, the cryptocurrency is currently trading just below $13,000. A crypto analyst recently commented that as investors look to the next bull run, if the price remains above $12,000 for an extended period of time, investors could look at $14,000 as the next target.

JPMorgan CEO Jamie Dimon Loves Blockchain but says Bitcoin Still Not His "Cup of Tea"

Speaking at the New York Times DealBook Summit on November 18, JPMorgan Chairman and CEO, Jamie Dimon showed his disinterest in Bitcoin (BTC) cryptocurrency, saying that “it’s just not my cup of tea.”

Andrew Ross Sorkin, the Co-anchor of “Squawk Box”, CNBC’s Signature Morning program, was the business reporter who hosted the virtual DealBook Summit. Besides, the presence of Dimon, other guests who also attended the event included Senator Elizabeth Warren, LeBron James, the US NBA basketball player, and Ruth Porat, the Chief Financial Officer of Alphabet Inc., and its subsidiary Google.

During the online event, Dimon expressed his support for blockchain technology, talking about its merits like having the potential to transform financial institutions and bring lower costs and faster execution of transactions, improved auditability and transparency, and other benefits. He mentioned that JPMorgan would always support blockchain technology.

Dimon said:

“The blockchain itself will be critical to letting people move money around the world cheaper. We will always support blockchain technology.”

However, he declined to give reasons behind his opposition to Bitcoin. He said that the cryptocurrency oversight is inevitable by making a prediction that governments would soon enforce stringent regulation of the cryptocurrency.

Dimon, however, appreciated that several very smart individuals like Paul Tudor Jones are buying Bitcoin with belief that the cryptocurrency would outperform US treasury bonds, US dollars, and gold. The JPMorgan CEO said:

“Let them do that. It’s just not my cup of tea.”

While Dimon is skeptical of BTC, he regretted calling Bitcoin a fraud and loves and believes in the technology behind the cryptocurrency. In 2017, he placed his big bet on the technology as JPMorgan Chase launched a blockchain-based system to reduce global transaction speeds.

JPMorgan Chase Launching JPM Coin Raises Questions

Despite Dimon expressing hostility to Bitcoin, JPMorgan Chase launched JPM Coin to serve as a value token on the Quorum consortium blockchain. Late last month, the U.S based investment bank created JPM Coin to facilitate smooth interbank payments (i.e., to speed transactions like payments between firms or bond transactions). The reason why Dimon is not interested in Bitcoin is still unknown.

JPMorgan says MassMutual Bitcoin Investment Signals Institutional Demand Could Quickly Grow by $600 Billion

JPMorgan thinks growing institutional demand could see up to $600 billion flow into Bitcoin in the near future after insurance giant Massachusetts Mutual Life Insurance Co. (MassMutual) invested $100 million into BTC.

While the $100 million Bitcoin investment is quite small for the US-based insurance company, whose general investment account totalled nearly $235 billion as of Sept. 30 this year—JPMorgan Chase & Co think it signals the potential for an additional $600 billion of institutional investment flowing into the BTC cryptocurrency’s marketcap in the near future.

According to Bloomberg on Dec. 14, JPMorgan’s Nikolaos Panigirtzoglou said MassMutuals $100 million BTC purchase suggests adoption of Bitcoin is spreading from family offices and wealthy investors to insurance firms and pension funds.

Panigirtzoglou predicts that more institutions are going to follow MassMutual’s, the JPMorgan strategist said:

“MassMutual’s Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors. One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example.”

The JPMorgan strategist said that insurance firms and pension funds are unlikely to ever make high allocations, but even a small shift toward the cryptocurrency could be significant—with only 1% of pension funds and insurance companies in the US, euro area, UK and Japan assets needed to accrue an additional $600 billion for Bitcoin’s marketcap.

Bitcoin Replacing Gold?

Bitcoin advocates argue the cryptocurrency is gaining more recognition as a portfolio diversifier amid the dollar decline in purchasing power similar to gold. However, many institutions remain unconvinced of Bitcoin’s ability to act as a store of wealth since the cryptocurrency world is prone to high volatility and cybercrime.

Tom Jessop, President of Fidelity Investments digital assets arm recently told Reuters, that his firm still uses the word “potential” when describing volatile Bitcoin’s ability to act as a store of value, although many investors appear sold on the BTC as a safe haven narrative.

The Bitcoin price has been flirting with $20,000 over the past few weeks, BTC’s macro bull-run appears largely driven by growing consensus in the market and amongst institutional investors of the crypto’s utility as a store of value against a weakening dollar. However, Fidelity Digital Assets President Tom Jessop explained to the Reuters Global Investment Outlook Summit that Bitcoin’s volatility makes it difficult to classify as a true store of value. Jessop said:

“We use the word ‘potential store of value’ as bitcoin is still extremely volatile, and by any standard perhaps would not achieve the mantle of a true store of value.”

JPMorgan CEO, Jamie Dimon also remains skeptical of Bitcoin, and does not appear completely onboard with the major US bank’s strategists who seem to be growing bullish on BTC.

In a recent report by Bloomberg, the JPMorgan strategists reported that Bitcoin’s institutional adoption had only started to pick up steam:

“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced.”

Meanwhile Bitcoin billionaire Tyler Winklevoss remains as bullish as ever that Bitcoin price will surge to $500,000 and replace gold as a store of value with a $9 trillion market cap by 2030. On the news of MassMutual’s $100 million investment, Winklevoss tweeted:

“And another domino falls on the yellow brick road to #Bitcoin being worth $500k per bitcoin. Who’s next?”

Crypto Market Cap Smashes $1 Trillion with JPMorgan Projecting $2.5 Trillion to Come

The cryptocurrency industry has surpassed the $1 trillion market capitalization, creating a new milestone in just over a decade since Bitcoin heralded the potentials in the newly invented digital currencies. Recent market projections from JPMorgan indicate that there could be an additional $2.5 trillion to come over the next year.

According to CoinMarketCap, the crypto industry now has an exact market capitalization of $1,008.32 Billion at the time of writing.

The volatility of the entire markets fueled by the intense buying and selling of the top cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), and other altcoins had fueled this growth in market cap which was pegged at $980 billion a day ago per an earlier report by Blockchain.News.

The Most Notable Crypto Rallies Driving

The market capitalization of the crypto industry is a sum total of the individual market cap of the more than 8,100 digital currencies but the market cap is majorly influenced by Bitcoin with an estimated dominance of 68.3%.

Bitcoin has seen tremendous growth in its value in the past month, fueled by massive institutional adoption and investing in the coin, a move that is complemented by a FOMO among retail investors. With new all-time highs recorded by BTC in the past days, the coin alone has a market cap of $689,840,611,158.

Other cryptocurrencies particularly in the top 10 also have a notable influence on the total market cap of the entire cryptocurrency industry. Ethereum adds $137 billion to the market cap amidst a growth of 60.5% in the past week, Tether (USDT) adds $22.8 billion to the market cap while XRP and Litecoin (LTC) supports the $1 trillion milestones with $13.3 billion and $11.1 billion respectively.

JPMorgan Project $2.5 Trillion Growth

The crypto market cap is not a magic number, it is simply a summation of the market cap of the coins as highlighted earlier and its continuous growth is dependent on the performance of the coins that add up the numbers.

At the current rate of growth of the coins in the industry, a bigger market cap is imminent, and should bitcoin beat the $146,000 projected by JPMorgan Chase & Co, the industry’s market cap could surpass more than $3.5 trillion as Bitcoin will have an estimated market cap of $2,714,612,602,000 estimated with the current circulating supply of 18.5 million BTC and other key parameters remain unchanged.

JPMorgan Strategists Explain Why Bitcoin is Currently the "Least Reliable Market Hedge" as BTC Price Drops

Bitcoin’s price has been down by 11% in the last 24 hours. After sustaining above the $35,000 threshold for most of the week, the mainstream cryptocurrency has faltered, even dropping to lows of $29K mark momentarily.

At the time of writing, its price is still holding above the $30,000 level, trading around $31,000. Market analysts are deducing that Bitcoin is now entering the bearish market, after having sustained a bull run fueled by institutional support and investors buying the cryptocurrency in fear of missing out.

Historically, altcoins have been correlated with Bitcoin, so along with BTC’s plunge this time, top cryptocurrencies such as Ether (ETH), Ripple (XRP), and Cardano (ADA) have also shed its gains, down 7%, 4%, and 3%, respectively. With Bitcoin plunging to lows of $30K, the mainstream digital asset has also lost nearly $200 billion in market value.

BTC correlates with traditional market

According to JP Morgan analysts, although Bitcoin has been used heavily as a hedge by institutional and retail investors in 2020, it may not be the ideal way to secure one’s wealth and should therefore not be the defensive market hedge of choice.

Per market experts, Bitcoin’s popularity among retail investors has served to increase the cryptocurrency’s correlation with the rest of the market. This makes the asset an unreliable defensive hedge, especially when the market experiences a crash. JP Morgan strategists John Normand and Federico Manicardi said:

“Bitcoin is the least reliable hedge during periods of acute market stress. The mainstreaming of crypto ownership is raising correlations with cyclical assets, potentially converting them from insurance to leverage.”

The strategists explained that while Bitcoin may be used to protect against the uncertainty surrounding traditional financial systems and fiat currencies, it is unlikely that BTC will behave like a traditional defensive asset, such as gold, anytime soon.

Is Bitcoin an ideal asset to diversify one’s portfolio then?

However, Bitcoin has been slowly but surely gaining traction, with its narrative shifting in 2020. As institutional support has backed the mainstream cryptocurrency and led the Bitcoin bull run, the digital asset’s full potential has yet to be uncovered.

Asset portfolio managers have started to recognize the value of Bitcoin. While it has been previously considered a risk to hold the asset in one’s portfolio, the underlying narrative surrounding BTC has quickly shifted to it being a career risk to not have Bitcoin in one’s portfolio as an investment expert.

However, as its full potential has yet to be uncovered, it has been speculated by some that Bitcoin is currently in bubble territory, threatening to plunge drastically in value. The sentiments of market analysts seem to be divided on that level. Normand and Manicardi commented:

“Whether cryptocurrencies are judged eventually as a financial innovation or a speculative bubble, Bitcoin has already achieved the fastest-ever price appreciation of any must-have asset.”

Previously, leading strategist at JP Morgan Chase, Nikolaos Panigirtzoglou had said that Bitcoin could potentially surge to a value of $146,000 in the long run, as investors are increasingly exiting gold and looking for other assets to store their wealth.