JPMorgan's Michael Cembalest Isn't Crazy About BTC

Michael Cembalest – chairman of investment strategy for financial giant JPMorgan – said in a recent interview that he’s not crazy about bitcoin and the world of crypto, suggesting that despite how much bitcoin expands and how popular it becomes, the currency is not going to rub everyone the right way.

Michael Cembalest Can’t Justify Crypto Excitement

Throughout the interview, Cembalest stated that the opinions expressed were his own and not those of JPMorgan. He says he’s not a fan of the world’s number one digital currency for two reasons. The first is because of its volatility, which he says prevents bitcoin from “settling into a range consistent with store of value investing.” The other reason is because bitcoin has not proven itself to be a hedge against inflation, like so many analysts would have us believe.

He commented:

Bitcoin’s volatility continues to be ridiculously high, and its volatility often rises when equity market volatility is rising, too. This volatility could be the byproduct of bitcoin concentration as two percent of bitcoin holders own 72 percent of its value.

He also says that there are far too many pump-and-dump schemes in the crypto space. This makes it unsafe and puts a lot of traders at risk. He mentioned:

Such schemes and other activities that would be prohibited in regular securities markets are, by definition, not illegal on decentralized blockchains.

At the time of writing, Cembalest says that he isn’t falling for the idea that bitcoin is a store of value, nor does he think it serves as a valid payment method for goods and services. he said:

Bitcoin is currently not a medium of exchange other than in a few niche cases. The declining number of bitcoin transactions per day and the spikes in execution costs bear no resemblance to any functioning fiat currency.

In addition, he also commented that bitcoin’s technology is not as safe as some might think. He discussed a recent Microsoft study that shows the algorithms behind bitcoin as being rather out of date, mentioning:

Some analysts note that bitcoin uses a ‘secure hash’ algorithm, which is more than 20 years old.

While there are now several industries resorting to blockchain adoption, he doesn’t think this will have any impact on the security and strength of the technology, nor does he think this will lead to the crypto space getting any bigger. He explained:

Adoption often has nothing to do with crypto valuations. For these firms, the blockchain is simply another cost-saving or productivity tool.

In His Mind, Crypto Isn’t a Strong Financial Tool

Overall, he cannot justify the excitement many people seem to feel for BTC, saying:

Some hydrogen use cases make sense, but energy investors are pricing in a lot more than that, and that’s how I feel about crypto valuations. Some crypto use cases will endure, but valuations assume broader and faster adoption.

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