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 JPMorgan'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 [UST], 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 downgraded them 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 to avoiding a "long winter" akin to 2018-2019, they say, will be venture capital funding, and thus far there's little evidence that has dried up.
• In addition, they noted, there hasn't been much spillover to other stablecoins, and the total value locked in decentralized finance (DeFi) projects excluding 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.