A recent investor note from JPMorgan analysts has argued that the true long-term risk to Bitcoin is not corporate sell-offs (which contradicts a plethora of recent opinion pieces).
The real risk lies in institutions pivoting toward private blockchain networks.
The MicroStrategy risk
Earlier this month, on July 2, JPMorgan analyst Nikolaos Panigirtzoglou opined that Strategy’s sales created an “avoidable” two-way flow risk. This is a rather substantial concern, given that the company holds an eye-popping 4% of the flagship cryptocurrency’s total circulating supply after years of hoarding.
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However, according to JPMorgan, Strategy’s sales, which currently occupy all of the headlines, are now a secondary issue.
Bitcoin is facing a greater threat of traditional finance adopting blockchain technology that bypasses permissionless networks.
Enterprise rails
JPMorgan is an example of one of the financial giants that has embraced private blockchain networks.
The bank runs Kinexys, a permissioned blockchain rail designed to settle transfers between institutional clients.
The internal platform has already processed over $4 trillion in cumulative transaction volume.
Incumbent financial institutions are successfully using the benefits of distributed ledger technology without interacting with public cryptocurrencies.
The current $50 billion market for real-world asset tokenization is likely just “early experimentation.” This might not be the ultimate destination for institutional capital.
Hoping for regulatory clarity
The JPMorgan note also cast doubt on whether upcoming crypto legislation will actually benefit Bitcoin.
Analysts warned that even if the highly debated CLARITY Act passes into law later this year, it may not resolve Bitcoin’s broader structural challenges.
In fact, the regulatory clarity would actually speed up the issuance of tokenized deposits by banks. This would crowd out public blockchain-based stablecoins.
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