Consider Digital Assets Instead of Still-Pricey Real Estate, say JPMorgan Strategists
Digital assets have replaced real estate as a preferred alternative asset class, according to the bank's alternative investments outlook and strategy note.
- "While public markets already price in significant recession risks, and digital assets have repriced significantly following the collapse of Terra USD, some alternative assets such as private equity, private debt and real estate appear to have lagged somewhat," JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note to clients Wednesday. "We thus replace real estate with digital assets as our preferred alternative asset class."
- As for alternatives overall, the team downgrades to underweight from overweight, expecting traditional assets to return 12% over the coming year versus just 10% for alternatives.
- Looking more broadly at crypto, they said the Terra collapse has crushed sector sentiment, thus offering a "good entry point" for longer-term investors. The key, they say, to avoiding a "long winter" akin to 2018/2019 will be venture capital funding, and thus far there's little evidence that's dried up.
- In addition, they noted, there hasn't been much spillover to other stablecoins, and the Total Locked Value in DeFi projects ex-Terra has been "relatively resilient."
- The recent downward moves in bitcoin (BTC) and the broader crypto market feel "like capitulation," said Panigirtzoglou and colleagues. Based on the bitcoin/gold volatility ratio, they peg fair value for the most popular of cryptos at $38,000, or nearly 30% above the current price.
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