JP Morgan has said that the recent rally in the market prices of bitcoin is nothing more than an "economic sideshow". The investment bank and financial services company added that fintech innovation was the real COVID-19 story and it would dominate the financial services sector in the near future.

Share Market Live

NSE

Despite the world's first cryptocurrency hitting a market capitalisation of $1 trillion on February 19, analysts at JP Morgan point out several issues with bitcoin, which could not allow it to become a mainstream asset, CNBC reported.

JP Morgan acknowledged bitcoin's "meteoric rise" following announcements from Tesla, BNY Mellon and Mastercard, but underlined that fintech innovation and rising "demand for digital services are the real Covid-19 story". Analysts say that the story also gets credence from the rise of online start-ups and the expansion of digital platforms into credit and payments.

On Sunday, bitcoin surpassed $58,000 per unit, almost doubling from $29,000 that it cost on January 27, which has been the lowest price so far this year. Its gains are largely attributed to the growing acceptance of the cryptocurrency among major investors.

The CNBC report also added that investors have often drawn parallels between bitcoin and gold and looked at the cryptocurrency as a "digital store of value". That's also because bitcoins will never exceed their cap of 21 million.

Despite JP Morgan's strategists saying it could rally as high as $146,000, economists, as well as other market experts aren't convinced. Even Tesla owner Elon Musk last week tweeted that the price of bitcoin and rival ethereum appeared "too high".

About the recent rally, economist Nouriel Roubini has said that while there was a massive rise, there's "huge volatility" as well. And that's what JP Morgan has underlined too. Its strategists say that bitcoin's current prices look "unsustainable" unless it becomes less volatile.

“Competition between banks and fintech is intensifying, with Big Tech possessing the most potent digital platforms due to their access to customer data,” JP Morgan said, as saying by CNBC.

Moreover, tech giants such as Apple and Google have shown tremendous interest in financial services, with the former launching its credit card, partnering with Goldman Sachs. Google has entered an agreement with Citigroup to allow users to open checking accounts.

JP Morgan added that digital banking has shown signs of tremendous growth during the pandemic, and large lenders and fintech aggressively adopted it after people spent more time at home due to COVID-19 restrictions.